3. In a binomial interest rate tree model, assume that the six- month rate process starts on date 0 (t=0) at 5% and then increases or decreases by 100 basis points every six months. On date 0, the prices of a six-month zero (A) and a 1- year zero (B) are 97.5610 and 95.0908 respectively. a) Find the risk-neutral probability of an up move on date 0 for the six-month rate process over the next 6-month. (4pt) [a]e 4 b) Find the price of the 1-year zero (B) in the down state of the binomial tree on date 1 (t=1). (4pt) [b] - 3. In a binomial interest rate tree model, assume that the six- month rate process starts on date 0 (t=0) at 5% and then increases or decreases by 100 basis points every six months. On date 0, the prices of a six-month zero (A) and a 1- year zero (B) are 97.5610 and 95.0908 respectively. a) Find the risk-neutral probability of an up move on date 0 for the six-month rate process over the next 6-month. (4pt) [a]e 4 b) Find the price of the 1-year zero (B) in the down state of the binomial tree on date 1 (t=1). (4pt) [b]