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10.23 9.56 8.91 8.83 7.8 7.21 7.1 7.41 6.97 6.35 a) Use the interest rate tree above to price an 8% coupon 4-Year $100 Par

10.23
9.56
8.91 8.83
7.8 7.21
7.1 7.41
6.97
6.35

a) Use the interest rate tree above to price an 8% coupon 4-Year $100 Par bond. The bond is puttable at the end of Year 1 for a price of $99.75, at the end of Year 2 for $99.85, and at the end of Year 3 at Par.

b) What is the option value?

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