The on-the-run issue for the XYZ Company is shown below along with the corresponding spot rates (assume annual compounding):

Maturity (yrs)	YTM (%)	Market price	Spot rate (%)
1	2.2500	100	2.2500
2	2.7500	100	2.7569
3	3.1000	100	3.1163

Assuming an interest rate volatility of 10%, the binomial interest rate tree for valuing bonds with maturities up to three years from XYZ is shown below:

You are a fixed income analyst and your boss wants you to analyze the following annual coupon bonds issued by XYZ:

Bond A: 3-years, 4.50% annual coupon, option-free

Bond B: 3-years, 4.50% annual coupon, callable at par at the end of year 1 and 2

Bond C: 3-years, 4.50% annual coupon, putable at par at the end of year 1 and 2

You determine the price of Bond C is 104. For 100bps increase in rates (across the yield curve) its price drops to 101.64. For 100bps drop in rates (across the yield curve) its price increase to 106.94. What is the effective duration of Bond C?

Group of answer choices

duration 1.0

1.0 < duration 1.5

1.5 < duration 2.0

2.0 < duration 2.5

duration > 2.5