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Basic Question 4 of 4
Two bonds have identical characteristics, except that Bond A is opton-free and Bond B is putable at par starting in 2 years. Bond A is selling for $107 right now. The LEAST LIKELY price for Bond B is:
B. $107
C. $110
A. $103
B. $107
C. $110
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Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
explain the relationships between the values of a callable or putable bond, the underlying option-free (straight) bond, and the embedded option;
describe how the arbitrage-free framework can be used to value a bond with embedded options;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.