Valuing the Call Feature Consider the prices in the following three Treasury issues as of 15 May:

Coupon Maturity Price Change YTM 6.500 16 May 106:10 −13 5.28 8.250 16 May 103:14 −3 5.24 12.000 16 May 134:25 −15 5.32 The bond in the middle is callable in February of next year.

Assume £1,000 par value. What is the implied value of the call feature? (Hint: Is there a way to combine the two non-callable issues to create an issue that has the same coupon as the callable bond?)