Given the following information:

Current Interest Rate is 5%

There are 3 different scenarios:

Interest Rate can stay the same at 5% with probability 1/3

or increase to 6% with probability 1/3

or decrease to 4% with probability 1/3

Bond's information:

Maturity is 8 years

Coupon is 5%, paid annually

Par value is $1,000

Call Price is $1,050

If the bond can be called immediately, at what interest rate will the bond be called?

Group of answer choices

4%

6%

5%

Using the information of question 3, what is the price of the callable bond? (Round to 2 decimal places)