Consider the following evolution of interest rates, i.. Price a 3-year zero-coupon bond (F=100) which is callable at 96 at T=1 and at 98 at T=2.. You can (in approximation) view this bond as a portfolio of a long position in the zero coupon bond, a short position in a European call option with a strike price 96 and maturity T=1, and a short position in a European call option with a strike 98 and maturity T=2.