Consider a 3-year, 5.5% annual coupon bond represented by the binomial interest rate tree below. The bond is callable at par starting at the end of year 1. The one-year benchmark implied forward rates are provided for one node of each year of the bond. The bonds OAS is 25 basis points. Assume that the interest rate volatility = 15%. What are the values of i_2,HL and V_2,HL ?

Consider a 3-year, 5.5% annual coupon bond represented by the binomial interest rate tree below. The bond is callable at par starting at the end of year 1. The one-year benchmark implied forward rates are provided for one node of each year of the bond. The bond's OAS is 25 basis points. Assume that the interest rate Volatilty = 15% What are the values of 12,HL and V2 HL? V = 100 C=5.5 V2 C-5.5 Vur C-5.5 IH V100 C5.5 Vo lo = 3.0000% V.HU C-5.5 i2 Va C=5.5 122= 3.5000% V100 C-5.5 V2, -5.5 izu 4.1000% V-100 C 5.5 Time - 0 Time - 1 Time 2 Time - 3 A 5.7844%, 99.731 B.5.7844%, 100.000 C.5.5344 101 102