Given a current one-period spot rate of S0 = 5%, upward and downward parameters of u = 1.1, d = 1/1.1, and a probability of the spot rate increasing in one period of q = .5:

a. Generate a two-period binomial tree of spot rates.

b. Using a binomial tree approach, calculate the value of a three-period, optionfree bond paying a 5% coupon per period and with face value of 100.

c. Using the binomial tree, calculate the value of the bond given it is callable with a call price of CP = 100.

d. Using the tree, calculate the value of the bond given it is putable with a put price of PP = 100.