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| 9.32 7.01 a) Use the adjacent tree to price a 4-year multi-step up callable bond. The bond pays a coupon of 4.5% for Year

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| 9.32 7.01 a) Use the adjacent tree to price a 4-year multi-step up callable bond. The bond pays a coupon of 4.5% for Year 1, 5.5% for Year 2 and 6.5% for Year 3. The bond is callable at $99 from Year 1 onwards. 5.43 7.76 3.45 5.74 4.45 6.21 b) What is the value of the option 4.7 5.03 | 9.32 7.01 a) Use the adjacent tree to price a 4-year multi-step up callable bond. The bond pays a coupon of 4.5% for Year 1, 5.5% for Year 2 and 6.5% for Year 3. The bond is callable at $99 from Year 1 onwards. 5.43 7.76 3.45 5.74 4.45 6.21 b) What is the value of the option 4.7 5.03

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