Question #59
Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options - Anwers
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Question
Suppose that the value of an option-free bond is equal to 100.16, the value of the corresponding callable bond is equal to 99.42, and the value of the corresponding putable bond is 101.72. What is the value of the call option?
Answer Choices:
A. 0.74
B. 0.64
C. 0.21. Explanation The call option value is just the difference between the value of the option-free bond and the value of the callable bond. Therefore, we have: Call option value = 100.16 – 99.42 = 0.74. (Module 27.1, LOS 27.b)
No explanation available for this question.