Question: 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
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 (1) If the bond can be called immediately, the price of the callable bond is $ . (2) If there is a call protection period of 14 year(s), the price of the callable bond is $ . NOTICE: Round all the intermediate calculations to 4 decimal places. When you get to the final answer, round it up to 2 decimal places. If you get 1.2345 then write 1.23.
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