Use an interest rate tree to work out what a callable or putable bond is worth

On a calibrated tree, value the straight cash flows backward from maturity. At each node from which the option can be exercised, compare the value before any coupon then due with the exercise price. For a callable bond, replace the value with the call price whenever the value is higher; for a putable bond, replace it with the put price whenever the value is lower. Add the coupon and discount the average of the two next values at the node's rate. The value today is the callable or putable bond's value, and the option's value is its difference from the straight bond. Check every exercise date, including those near today.