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  3. consider a $1,000 par corporate bond with a 7% ann

Consider a $1,000 par corporate bond with a 7% annual coupon and exactly three years...

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Finance

Consider a $1,000 par corporate bond with a 7% annual coupon and exactly three years until
maturity that is both callable and putable according to the following schedule:
Callable in year 1 at 102% of par; callable in year 2 at 101% of par
Putable any time starting in year 1 at par
Assume that both the call and put options will be exercised if it is at all profitable to do so
Using a three-period binomial pricing model with the following interest rate tree, compute the value
of the bond. (3 points)Consider a $1,000 par corporate bond with a 7% annual coupon and exactly three years until
maturity that is both callable and putable according to the following schedule:
Callable in year 1 at 102% of par; callable in year 2 at 101% of par
Putable any time starting in year 1 at par
Assume that both the call and put options will be exercised if it is at all profitable to do so
Using a three-period binomial pricing model with the following interest rate tree, compute the value
of the bond. (3 points)
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