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Now given the following information with expected to possible movements of rates, please value the following bonds? Each arrow represents a probability of 5 0

Now given the following information with expected to possible movements of rates, please value the following bonds? Each arrow represents a probability of 50% at point of intersection Use that information to value the following bonds. All possible rate paths have a 50% probability at each point. 1) You are looking at a callable bond with par value of $1 million which is callable starting at year 1. The bond has a 3 year maturity and has a coupon of 5% and has a bullet maturity due in 3 years unless it is called between year 1 and year 3. The bond is callable at par should issuer choose to exercise option.
a. What is value of the bond without call and what is value of bond with call?
b. What is implied value of the call?
2) Value a putable bond with par value of $1 million which is putable starting at year 1. The bond has a 3 year maturity and has a coupon of 5% and has a bullet maturity due in 3 years unless it is put back to issuer between year 1 and year 3? The bond is putable at par should investor choose to exercise option.
a. What is value of the bond without put and what is value of bond with put?
b. What is implied value of the put?
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