Consider the prices in the following three treasury issues, Ask an Expert

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Consider the prices in the following three Treasury issues as of May 15, 2014: 05/15/2020 6.75 116.46875 116.53125 − .31250 4.800 05/15/2020 8.10 113.59375 113.65625 − .09375 5.400 05/15/2020 12.25 139.75000 139.93750 − .46875 4.570 The bond in the middle is callable in February 2015. 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. Round your answer to 2 decimal places, e.g., 32.16.) Call value $

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Financial Management, Finance

Category:- Financial Management
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