Question

At one point, certain U.S. Treasury bonds were callable. Consider the prices in the following three Treasury issues as of May 15, 2017:

05/15/2020		6.35				108.62500		108.68750		−	.31250		3.290
05/15/2020		7.40				109.15625		109.21875		−	.09375		4.100
05/15/2020		8.15				114.21875		114.40625		−	.46875		3.090

The bond in the middle is callable in February 2018. What is the implied value of the call feature? Assume a par value of $1,000. (Hint: Is there a way to combine the two noncallable issues to create an issue that has the same coupon as the callable bond?) (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

	Call value

Answer 1

Answer:

DEAR STUDENT HAPPY TO ASSIST YOU, PLEASE "UPVOTE" THE SOLUTION IF SATISFIED. THANK YOU :)