- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 3. Valuation of Default-Free Callable and Putable Bonds
CFA Practice Question
What is the value of a 2-year, 6% coupon, putable bond given the following interest rate tree?
Correct Answer: 
Current value of the bond at node 0 = [(100.000 + 6) / (1.038796) + (101.302 + 6) / (1.038796)] /2 = 102.668.
User Contributed Comments 5
| User | Comment |
|---|---|
| vi2009 | take $100+6 instead of $99.755 since only exercisable if interest rate <6% |
| Allen88 | Thanks vi2009, I missed that. |
| shajidubai | The question has to specifically say the put price as 100. |
| ashish100 | Got in on my own on the first try! :D Haters gonna hate. Ainters gonna aint.. |
| ashish100 | Call/put price is normally par value per reading |