In Class Problems Related information: Maturity years Weldtomaturity(%) Market rice The binomial interest rate tree (volatility 110%) 100 100 100 603% 7.5 7.6 7.7 481% 7862% 7.500% 6.944% 6437% Today 1Ye r 2Near-- Spot rate (%) 7.500 7.604 Maturity(years) monstrate using the 2-year issue that the binomial interest rate tree above is in fact an arbitrage free tree. b. Using the spot rates given above, what is the arbitrage-free value of a 3-year 8.5% coupon issue? S. Using the binomial tree, determine the value of an 8.5% 3-year option-free bond