Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Transcribed Image Text:At one point, some Treasury bonds were callable. Consider the prices on the following three Treasury issues as of May 15, 2022:
7.20 May 26
8.95 May 26
12.70 May 26
116.40625 116.46875 -.46875 5.42
113.53125 113.59375 -.21875 5.38
148.68750 148.87500 -.53125 5.46
The bond in the middle is callable in February 2023. 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?)
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