The following are the $1$ year forward rates over the next three years:

$\backslash$table$[[$Period$,$Rate $(\%)],[0y1y,2\mathrm{.}98],[1y1y,3\mathrm{.}66],[2y1y,4\mathrm{.}18]]$

Find the price of a default$-$free bond with $3$ years to maturity, annual coupon payments, and $6\mathrm{.}55\%$ coupon rate, if the bond has an embedded Bermudan style put option and is putable at par $1$ and $2$ years from now. Assume no volatility of interest rates.

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orrect Answer

$108\mathrm{.}31$ margin of error $\frac{+}{.}1\%$