D. Consider 6-month spot interest rates evolving in the following three-step binomial tree over 24 months, i.e., with 6 months in each of the next three steps. The current 18-month spot interest rate is 5.15%, the current 12-month spot interest rate is 5.3%, and the current 24-month spot interest rate is 5.45%
1. The risk neutral probability for the up move in the last (third) step.
2. The current fair value of a 18-month European call option with a strike price of $974 written on a 24-month zero coupon bond with face value $1000.
3. . The current fair value of a 12-month European put option with a strike price of $994 written on a 24-month zero coupon bond with face value $1000.