Question: At one point, some Treasury bonds were callable. Consider the prices on the following three Treasury issues as of May 15, 2016: 7.05 May 20

At one point, some Treasury bonds were callable. Consider the prices on the following three Treasury issues as of May 15, 2016:


7.05	May	20	n	110.31250	110.37500	.37500	5.39
8.80	May	20		107.43750	107.50000	.12500	5.35
12.55	May	20		145.93750	146.12500	.43750	5.43

The bond in the middle is callable in February 2017. 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?) (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Calculate Call value $ ________

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