in A straight 5% bond has two years remaining to maturity and is priced at $981.67.A callable bond that is the same in every respect as the straight bond ,expect for the call feature, is priced at $917.60. With the yield curve flat at 6%,what is the value of the embedded call option? A $-82.40 B $45.80 C $64.07 D $101.00 This is my answer: Consider the market yield has been up to 6%,the value of the call option should decrease . So B is the possible answer. Why the answer in the book is C? Thanks. |