I saw this question in Schweser exam. A bond is both callable and putable at 100, why is it likely to be priced at 100%? My logic will go thru: bond price = bond + put - call But then I’m pretty much stuck. I’m thinking if the bond is above (below) 100, the call price will increase (decrease) and put price will decrease (increase). But do the changes in call and put offset each other? I would really appreciate some help on this. Thanks guys!
If bond goes above 100 - it will be called at 100 by the issuer. if it falls below 100 - the owner will put it back to the issuer. So 100 is the only place it can be. Does it make sense?