Question
Consider the prices in the following three Treasury issues as of May 15, 2011: 6.500 May 17 n 106:10 106:12 ? 13 5.28 8.250 May
Consider the prices in the following three Treasury issues as of May 15, 2011:
| 6.500 | May | 17 | n | 106:10 | 106:12 | ? | 13 | 5.28 | ||||||
| 8.250 | May | 17 | 103:14 | 103:16 | ? | 3 | 5.24 | |||||||
| 12.000 | May | 17 | 134:25 | 134:31 | ? | 15 | 5.32 | |||||||
The bond in the middle is callable in February 2012. 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?)
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Basic Finance An Introduction To Financial Institutions Investments And Management
Authors: Herbert B. Mayo, Michael J Lavelle
13th Edition
0357714741, 978-0357714744
