1. Patrick Wall is a new associate at a large international financial institution. Wall has recently completed graduate school with a Master's degree in finance, and is also currently a CFA Level I candidate. His previous work experience includes three years as a credit analyst at a small retail bank. Wall's new position is as the assistant to the firm's fixed income portfolio manager. His boss, Charles Johnson, is responsible for getting Wall familiar with the basics of fixed income investing. Johnson asks Wall to evaluate the bonds shown in Table 1. The bonds are otherwise identical except for the call feature present in one of the bonds. The callable bond is callable at par and exercisable on the coupon dates only.

   Table 1: Bond Descriptions
   	Non-Callable	Callable Bond
   Price	$100.83	$98.79
   Time to Maturity (years)	5	5
   Time to First Call Date	--	0
   Annual Coupon	$6.25	$6.25
   Interest Payment	Semi-annual	Semi-annual
   Yield to Maturity	6.0547%	6.5366%
   Price Value per Basis Point	428.0360	**

   Wall is told to evaluate the bonds with respect to duration and convexity when interest rates declined by 50 basis points at all maturities over the next six months. Johnson supplies Wall with the requisite interest rate tree and explains to Wall that the prices of the bonds in Table 1 were computed using this interest rate lattice. Johnson instructs Wall to try and replicate the information in Table 1 and use his analysis to derive an investment decision for his portfolio.

   Wall is having a few problems computing the bond prices using the interest rate tree. He would like to compute the value of the non-callable bond at node A given the relevant part of the tree. Using the referenced portions of the tree what is the value of the non-callable bond at node A?

   The value of the bond at node A is closest to:

   	a)	$97.02.
   	b)	$90.56.
   	c)	$94.01.