Question #33
Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options
PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options.pdf
Page: 9
Status: Correct
Correct Answer: A
Question
How is the value of the embedded call option of a callable bond determined? The value of the embedded call option is:
Answer Choices:
A. determined using the standard Black-Scholes model
B. equal to the amount by which the callable bond value exceeds the option-free bond value
C. the difference between the value of the option-free bond and the callable bond
No explanation available for this question.