Excel Problem: The following problems should be done using the Excel programs Binomial Bond Valuation.xls.

Given the following:

 Current spot = 0.08

 Annualized mean for the spot rate’s logarithmic return of .022

 Annualized variance for the spot rate’s logarithmic return of .0054

 Binomial interest rate tree with monthly steps Determine the values of the following:

a. Five-year, 8% option-free bond, with F = 100

b. Five-year, 8% callable bond (F = 100) with call price = 100

c. Five-year, 8% putable bond (F = 100) with put price = 100