Question: Valuing the Call Feature [L02] At one point, certain U.S. Treasury bonds were callable. Consider the prices in the following three Treasury issues as of

Valuing the Call Feature [L02] At one point, certain U.S. Treasury bonds were callable. Consider the prices in the following three Treasury issues as of May 15, 2021: 5/15/2027 5/15/2027 5/15/2027 6.500 8.250 12.000 106.31250 103.43750 134.78125 106.37500 103.50000 134.96875 -.31250 -.09375 -.46875 5.28 5.24 5.32 The bond in the middle is callable in February 2022. 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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