Question: Given this Binomial interest rate tree with volatility, please calculate the price of the CALLABLE BOND. Use the Backward Induction process we have reviewed in

Given this Binomial interest rate tree with volatility, please calculate the price of the CALLABLE BOND. Use the Backward Induction process we have reviewed in class. The below are 1-year forward rates. Ex: 2.96% is the 1y rate, 2-years forward. Assume 50%/50% probability of an up or down move in rates

Bond Coupon = 2.35% pays annually; Bond Matures in Year 3; Callable in Years 1 and 2 at $100 Par Value = $100; Assume ANNUAL COMPOUNDING

Year 0	Year 1	Year 2
		2.96%
	2.64%
2.00%		2.64%
	2.16%
		2.32%

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