Call option

CFA Level I Fixed Income
#1

Hi all,

I have a question on an example of Kaplan book 5 page 12.

Question: 6% 20-year $1,000 par value bond with 6% market interest rate at issuance date June 1 2012. The first call is at June 1 2017. And the market yield declined to 4%. What is the market value as of June 1st, 2017 without the call option?

My answer: N = 15, PMT = 6% * 1,000 = 60, FV = 1,000, I/Y = 4, CPT PV = -1,814

Correct answer: $1,224.

I am not sure what i did wrong.

Anyone help?

Thanks,

Sophie

#2

I suspect that you input a number incorrectly; I get $1,222.

#3

With the same inputs? I tried multiple times, all show as -1,814 :frowning:

#4

Yes: same inputs.

#5

Is your calculator set to semiannual payments?

#6

No i dont think so. Why? Did you get the my results using semiannual payments? :frowning: super confused here.

#7

I’m just spitballing here. I don’t know how you got your result.

#8

This may sound obvious, but did you clear your TVM?

#9

Have no idea what was going on. But I reset my calculator and I got the same 1,222.37 answer. Thanks everyone!!

#10

The clear button is our best friend :wink: