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7. Assuming that the interest rate tree has been calibrated as follows: The interest rate...

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7. Assuming that the interest rate tree has been calibrated as follows: The interest rate tree calibrated is as follows: = (year 1: 10 to 1) 1 (year 2: t1 to 12) 2 (year 3: 12 to t3) =3 9.2001% 4.9345% 2.0% 6.167% 3.3077% 4.1339% Using the interest rate tree calibrated, assuming an equal probability of rising and falling interest rates, compute the price of a 3-year, 5% bond callable in years 2 and 3 at 100. (12 points)

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