Find the cost of the call feature

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Reference no: EM132011797

Three $1000 face amount XYZ Corporation bonds with annual Coupons are on sale now. All have equal risk, the same number of years to maturity, and the same general terms, with one have equal risk, the same number of years to maturity, and the same general terms, with one exception: Bond 2 callable after 5 years. Coupon rates and prices are as in the table below

Bond Price Coupon Rate

Bond 1 $850 4%

Bond 2 $860 6%

Bond 3 $950 7%

Find the cost of the call feature.

Reference no: EM132011797

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