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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 6.60
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 6.60 108.78125 108.84375 - .31250 3.470 05/15/2020 7.65 109.31250 109.37500 -.09375 4.290 05/15/2020 8.20 114.37500 114.56250 -.46875 3.080 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.) Answer is complete but not entirely correct. Call value $ 768.51
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