Question: What is the value of a 3-year step-up callable note that pays 5% for two years and then 8% for two more years using

What is the value of a 3-year step-up callable note that pays 5% for two years and then 8% for two more years using the interest rate tree below. Assume that this note is callable in one year at par ($100). (i.e. The bond is callable starting from year 1). 9.1987% 3.5000% Today 5.4289% Year 1 NHH NLL 7.0053% 5.7354% 4.6958% Year 2 NHHH NHHL NHLL NELL 7.5312% 6.1660 % 5.0483% Year 3

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