Valuing the Call Feature Consider the prices of the following three Treasury issues as of February 24, 2012:

6.500 May 16 106.31250 106.37500 −13 5.28 8.250 May 16 103.43750 103.5000 −3 5.24 12.000 May 16 134.78125 134.96875 −15 5.32 The bond in the middle is callable in February 2013. What is the implied value of the call feature? ( Hint: Is there a way to combine the two noncallable issues to create an issue that has the same coupon as the callable bond?)