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Question

Consider the prices of the following three Treasury issues as of February 24, 2012:

7.100 May 17 112.34375 112.40625 −13 5.40
7.990 May 17 109.46875 109.53125 −5 5.36
11.740 May 17 146.62500 146.81250 −15 5.44

The bond in the middle is callable in February 2013. What is the implied value of the call feature? (Hint: Is there a way to combine the two noncallable issues to create an issue that has the same coupon as the callable bond?) (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))