Question
Consider the prices of the following three Treasury issues as of February 24, 2012: 7.050 May 17 110.31250 110.37500 ?12 5.39 8.030 May 17 107.43750
| Consider the prices of the following three Treasury issues as of February 24, 2012: |
| 7.050 | May | 17 | 110.31250 | 110.37500 | ?12 | 5.39 | ||||||||
| 8.030 | May | 17 | 107.43750 | 107.50000 | ?4 | 5.35 | ||||||||
| 11.780 | May | 17 | 145.93750 | 146.12500 | ?14 | 5.43 |
| 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?) (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
Consider the prices of the following three Treasury issues as of February 24, 2012: 7.050 8.030 11.780 May 17 May 17 May 17 110.31250 107.43750 145.93750 110.37500 107.50000 146.12500 12 4 14 5.39 5.35 5.43 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?) (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
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Personal Finance
Authors: Jeff Madura
7th Edition
0134989961, 978-0134989969
