(b) The following is a binomial tree with effective annual interest rates: Year 0 Year 1 Year 2 Year 3 -7.19% 6.97% 6.15% -6.25% 5% 5.69% 4.83% 5.43% 4.64% M 4.72% The probability of an upward move is 0.6. Calculate the value of a fourth-year caplet of 6% on a loan amount of $1,000. (7 marks)