4. Consider a default-free bond that has three years to maturity, annual coupons of 3.75%, and is callable at par one year and two years from today a) Using the binomial interest rate tree below, compute the price of the bond. b) Relative to the price at current assumed volatility, would the price of the bond at a lower interest rate volatility be higher or lower? Year 0 Year 1 Year 2 5.5258 3.8695 2.5000 4.5242 3.1681 3.7041 4. Consider a default-free bond that has three years to maturity, annual coupons of 3.75%, and is callable at par one year and two years from today a) Using the binomial interest rate tree below, compute the price of the bond. b) Relative to the price at current assumed volatility, would the price of the bond at a lower interest rate volatility be higher or lower? Year 0 Year 1 Year 2 5.5258 3.8695 2.5000 4.5242 3.1681 3.7041