. Valuing Bonds with Uncertainty The assignment is about valuing bonds in an environment of uncertain interest rates. 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 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. We will complete the following table by answering the following nine questions. Some of the cells are already complete so that you can verify your calculations against mine. Perform your calculations on a calculator or with Excel. Round your final answer as in the table above. Do not round intermediate values; use all the decimal places in subsequent computations. Discount Factor Price Yield $921.0854 4.20% $0.9211 Asset 1-year zero-coupon face $1,000. coupon 0% 2-year zero-coupon face $1,000, coupon 0% 3-year zero-coupon face $1,000, coupon 0% 4-year zero-coupon face $1,000, coupon 0% 4-year coupon face $1,000, coupon 5% $879.1023 4.39% $0.8791 Consider a one-year zero-coupon bond with a face value of $1000. 1. What is the price or value of the bond? 2. What is the yield to maturity of the bond? 3. What is the one-year discount factor (present value of $1 delivered in the future)