Part 1: Fixed Income Options Suppose that you are given the following interest rate tree with semi-annually compounded interest rates. Since the interest rates are semi-annually compounded, you should use 1+2r1 to discount rather than e0.5r. t=0t=0.5t=1 1. Using the tree above, calculate the price of a 1.5-year bond with a coupon rate of 3% (coupons paid semi-annually) and a face value of $100. 2. Calculate the price of a 1.5-year cap with a strike of 3% and a notional of $100. 3. What is the price of a 1.5-year floor with a strike of 3% and a notional of $100 ? Part 1: Fixed Income Options Suppose that you are given the following interest rate tree with semi-annually compounded interest rates. Since the interest rates are semi-annually compounded, you should use 1+2r1 to discount rather than e0.5r. t=0t=0.5t=1 1. Using the tree above, calculate the price of a 1.5-year bond with a coupon rate of 3% (coupons paid semi-annually) and a face value of $100. 2. Calculate the price of a 1.5-year cap with a strike of 3% and a notional of $100. 3. What is the price of a 1.5-year floor with a strike of 3% and a notional of $100