Section III: Calculation Questions Instruction: 1. Show your calculation steps sufficiently clear. 2. Round your answers with 4 decimals. 2. Assuming an interest rate volatility of 15% for the 1-year rate, the binomial interest rate tree for valuing a bond with a maturity of up to three years is shown below: 8.1059% 6.6042 5.5% 6.0050% 4.8925% 4.4486% Consider an annually-paid 3-year 6.8% callable bond with a par value of $100 that is callable in one year at a call schedule as below: $101 after Year 1: $100 after Year 2. What is the value of this callable bond? (10%)