binomial intrest rate tree (bonds)

2. Valuation of an option free bond using the binomial interest rate tree. You are interested in valuing three bonds using the following binomial interest rate tree: 2 ro = 3.5% 1,u = 5.429% 72,uu = 7.005% 73.uuu = 9.199% 71.d = 4.445% 2.ud = 5.735% 3.uud = 7.531% 12.dd = 4.696% 73,udd = 6.166% Assume that the risk-neutral probability that the one-period interest rate moves up or down is 0.5 and Pr ddd = 5.048% par value is $100. 1) Derive the cash flow tree and the value tree for a two-period zero-coupon bond; 2) Derive the cash flow tree and the value tree for a four-period zero-coupon bond; 3) Derive the cash flow tree and the value tree for a three-period coupon bond that pays 6.5% coupon per period. 2. Valuation of an option free bond using the binomial interest rate tree. You are interested in valuing three bonds using the following binomial interest rate tree: 2 ro = 3.5% 1,u = 5.429% 72,uu = 7.005% 73.uuu = 9.199% 71.d = 4.445% 2.ud = 5.735% 3.uud = 7.531% 12.dd = 4.696% 73,udd = 6.166% Assume that the risk-neutral probability that the one-period interest rate moves up or down is 0.5 and Pr ddd = 5.048% par value is $100. 1) Derive the cash flow tree and the value tree for a two-period zero-coupon bond; 2) Derive the cash flow tree and the value tree for a four-period zero-coupon bond; 3) Derive the cash flow tree and the value tree for a three-period coupon bond that pays 6.5% coupon per period