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karoliukas

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tT
发表于 2013-4-7 10:20 | 只看该作者

R56 EOC #28 - Bond with call option

option, should, price
28. Today’s ex-coupon price of the callable Wentz bond is closest to:
Answer:
C. 105.0263
How could Wentz bond be priced over 104? It is callable tomorrow and the value should be capped by the strike price.
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troymo

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发表于 2013-4-7 10:21 | 只看该作者
there is time value of coupon payments which are cash flows

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burnsy562000

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发表于 2013-4-7 10:22 | 只看该作者
I understand that if the bond is called, the bondholder wouldn’t receive the coupon. If you are buying the bond today at 105 and tomorrow it’s called at 104, that’s an instantaneous loss.

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