Consider the prices of the following three Treasury issues as of February 24, 2015: The bond in

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Consider the prices of the following three Treasury issues as of February 24, 2015:

The bond in the middle is callable in February 2016. What is the implied value of the call feature?

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Corporate Finance

ISBN: 978-0071339575

7th Canadian Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Gordon Ro

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Question Posted: Jun 17, 2015 04:46 AM

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Consider the prices of the following three Treasury issues as of February 24, 2015: The bond in

Question:

Coapon Maturity Bid 106:12 103:16 12.000 May 2019 134:25 134:31 Ask Change Yield 13 5.28 -3 5.24 -15 5.32 May 2019 May 2019 6.500 106:10 103:14 8.250

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To calculate this we need to set up an equation with the callable bond equal to a w...View the full answer

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