The term structure of interest rates is flat at 9.5 %, but rates could change immediately to 11.5 % or 7.5 % with probability of 0.72 and 0.28 , respectively, and stay at that level forever. You purchase a callable bond with 14 years to maturity and 9.5 % coupon paid annually. The callable bond can be called at $ 130 with a call protection period of 0 years.

NOTICE:Round ALL calculations to 4 decimal places. Only round what you input in the blank to 2 decimal places.If you get 1.2345 then write 1.23.

The price of the callable bond is $_______________

The price of the straight bond is $_______________