Tina Donaldson, CFA candidate, is studying yield volatility and the value of putable bonds. She has the following information: a putable bond with a put option value calculated at 0.75 (prices are quoted as a percent of par) and a straight bond similar in all other aspects priced at 99.0. Donaldson also wants to determine how the bond’s value will change if yield volatility decreases. Which of the following choices is closest to what Donaldson calculates as the value for the putable bond and correctly describes the bond’s price behavior as yield volatility decreases()
A. 99.75, price increases
B. 99.75, price decreases
C. 98.25, price decreases
参考答案：B
解析：
To calculate the putable bond value, use the following formula: Value of putable bond=Value of straight bond+Put option value Value of putable bond=99.0+0.75=99.75. Remember: The put option is added to the bond value because the put option is of value to the bondholder, not the issuer. As yield volatility decreases, the value of the embedded option decreases. The formula above shows that for a putable bond, a decrease in the option value results in a decreased bond value.