At yield levels below that of the coupon rate, callable bonds will trade very close to their call price, irrespective of yield changes.
Hence, these bonds become extremely insensitive to small changes in yield.

There is no effect on the numerator since the cash received from the exercise of the options is not income. The denominator increases by 12,500 based on the treasury method. The method assumes the company would repurchase as many shares as possible with the proceeds from the exercise.
Therefore, 50,000 X $30 = $1,500,000/40 = 37,500. Since they could repurchase 37,500 at the average stock price, there would be 12,500 shares still outstanding.

1/1/00 (22,000 shares adjusted for 10% stock dividend)(12 months) = 264,000 6/1/00 (7,700 shares adjusted for 10% stock dividend)(7 months) = 53,900 Total share month = 317,900 Average shares = 317,900/12 = 26,492 Basic EPS = ($150,000 - $80,000)/26,492 = 2.64

A dramatic increase in the demand for short-term U.S. Treasury issues will cause the yields on these issues to fall relative to intermediate-term and long-term issues. This will have the following effects on the U.S. Treasury Yield curve: A flat yield curve will become upward sloping An upward sloping yield curve will steepen An inverted yield curve will flatten (or in extreme cases will become upward sloping).
The reason for these shifts is that a decrease in the yield on short-term Treasury issues versus intermediate and long-term U.S. Treasury issues will cause a shift in the yield spread between these securities, i.e. the difference between the yields on short-term issues and the yields on intermediate and long-term issues will be change. The U.S. Treasury Yield Curve will illustrate this change.