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. Please explain answer Using a three-period binomial pricing model with the following interest rate tree, compute the value of the bond.

7.0053% 3.50% 5.4289% 4.4448% 5.7354% 4.6958% Today Year 1 Year 2 7.0053% 3.50% 5.4289% 4.4448% 5.7354% 4.6958% Today Year 1 Year 2