Consider a $$1,000$ par corporate bond with a $7\%$ annual coupon and exactly three years until

maturity that is both callable and putable according to the following schedule:

$$ Callable in year $1$ at $102\%$ of par; callable in year $2$ at $101\%$ of par

$$ Putable any time starting in year $1$ at par

$$ Assume that both the call and put options will be exercised if it is at all profitable to do so

Using a three$-$period binomial pricing model with the following interest rate tree, compute the value

of the bond. $(3$ points$)$Consider a $$1,000$ par corporate bond with a $7\%$ annual coupon and exactly three years until

maturity that is both callable and putable according to the following schedule:

Callable in year $1$ at $102\%$ of par; callable in year $2$ at $101\%$ of par

Putable any time starting in year $1$ at par

Assume that both the call and put options will be exercised if it is at all profitable to do so

Using a three$-$period binomial pricing model with the following interest rate tree, compute the value

of the bond. $(3$ points$)$