You assume the following information regarding the risk free interest rates and a debt-issuing (with a face value of $1,000) corporate respective interest rates:

Years	Risk Free Interest Rate	Corporate Interest Rate
1	4%	4.5%
2	4%	5.0%
3	4%	5.5%
4	4%	6.0%
5	4%	6.5%

What is the approximate hazard rate in year 4?

A. 4.44%

B. 5.44%

C. 6.44%

D. 7.44%

E. 3.44%

Part B

Given the following interest rate information:

i.r. (present time) = 3.6%; i.r. (year 1, up) = 4.2%; i.r. (year 1, down) = 3.3%

i.r. (year 2, up-up) = 4.7%; i.r. (year 2, up-down) = 4.1%;

i.r. (year 2, down-down) = 2.9%

What is the current value of a 5.5% annually-paid coupon, 3-year option-free bond with a par value of $1,000?

A. $988.57

B. $1,018.57

C. $1,098.57

D. $1,128.57

E. $1,048.57