1. Assume the following interest rate tree :

			2.27%
		1.69%
	1.22%		1.69%
0.85%		1.25%
	0.90%		1.25%
		0.93%
			0.92%
Current 6-month rate	6 months	12 months	18 months

1. Calculate value of the (option-free) bond using binomial model.
2. Assume the bond is callable on 1 Jun 2018 and 1 Dec 2018 at $102.00, calculate the value of the bond.
3. Calculate value of the call option and comment on who bears the cost of the call option.