Please answer question 3

- The interest rate for the first year is 4% (no uncertainty). - The one-year interest rate could move up or down by 1% each year. - The probability that the rate moves higher is 70%; it moves lower is 30%. Note that the values differ from the lecture examples. - All bonds have a face value of $1,000. - Coupon bonds have a coupon rate of 5%, paid annually at the end of each year. Perform your calculations on a calculator or with Excel. Round your final answer as in the table below. Do not round intermediate values; use all the decimal places in subsequent computations. Consider a three-year zero-coupon bond with a face value of $1000. 2. What is the price or present value of the bond based on the binomial model? 3. What is the yield to maturity of the bond