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Now given the following information with expected to possible movements of rates, please value the following bonds? Each arrow represents a probability of 5 0
Now given the following information with expected to possible movements of rates, please value the following bonds? Each arrow represents a probability of at point of intersection Use that information to value the following bonds. All possible rate paths have a probability at each point. You are looking at a callable bond with par value of $ million which is callable starting at year The bond has a year maturity and has a coupon of and has a bullet maturity due in years unless it is called between year and year The bond is callable at par should issuer choose to exercise option.
a What is value of the bond without call and what is value of bond with call?
b What is implied value of the call?
Value a putable bond with par value of $ million which is putable starting at year The bond has a year maturity and has a coupon of and has a bullet maturity due in years unless it is put back to issuer between year and year The bond is putable at par should investor choose to exercise option.
a What is value of the bond without put and what is value of bond with put?
b What is implied value of the put?
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