Given the following information:

Current Interest Rate is 3%

There are 3 different scenarios:

Interest Rate can stay the same at 3% with probability 0.15

or increase to 5% with probability 0.17

or decrease to 1% with probability 0.68

Bond's information:

Maturity is 23 years

Coupon is 3% , paid annually

Par value is $1,000

Call Price is $1,019

There is a call protection period of 14 years.

At what interest rate will the bond be called on the first call date?

Group of answer choices

3%

5%

1%

2. Using the information above, what is the price of the callable bond?