The term structure of interest rates is flat at 4.3 %, but rates could change immediately to 6.3 % or 2.3 % with probability of 0.48 and 0.52 , respectively, and stay at that level forever. You purchase a putable bond with 30 years to maturity, 4.3 % coupon paid annually and par value of $100. The putable bond can be put at $ 98 immediately.

a) Will the bond be put at interest rate of 2.3% or 6.3%?

b) what is the price of this putable bond?

c) what is the yield spread of the putable bond over the straight bond with same characteristics? (enter in percentage points)

c) what is the expected price of a straight bond with same characteristics of this putable bond? (2 decimal places)