Consider a semi-annual coupon bond. Its face value is $1,000, it bears a 6 percent coupon rate per year, and will mature in 2 years. (Note: You must show all the steps on how to obtain the values or your attempt will be penalized. )

3) Suppose that the CIR model generates the following binomial interest tree (forward rates) lattice. Calculate the bond price using the backward induction method. t=1 t=2 t=3 t=4 10.90 2.2 4.9 8.7 1.8 2.8 5.0 1.6 2.9 1.7 3) Suppose that the CIR model generates the following binomial interest tree (forward rates) lattice. Calculate the bond price using the backward induction method. t=1 t=2 t=3 t=4 10.90 2.2 4.9 8.7 1.8 2.8 5.0 1.6 2.9 1.7