A commodity coupon bond pays 5 dollars in period 1.

It pays 10 dollars in period 2 and in period 3 it pays the dollar value of the commodity price.

Each period is one year. The convenience yield is 10% and the risk-less interest rate is 10%. u and d are given by 1.2 and 1/1.2 respectively.

The lattice of commodity prices is given below.

Value the commodity coupon bond. Assume the firm that issue the bond is default free. Show all steps in your computations.

34.56 28.8 24.00 24.00 20.00 20.00 16.67 16.67 13.89 11.57 34.56 28.8 24.00 24.00 20.00 20.00 16.67 16.67 13.89 11.57