Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Put option is the right of the investor which he may exercise on the date at the put price given in the indenture. Normally, put price is in par value. When yield rises such that the bond's value falls below the put price, then investor will exercise the put option.
The value of putable bond is equal to the value of option-free bond plus the value of the put option. Therefore, the value of embedded option is equal to the difference between the value of a putable bond and the value of comparable option-free bond.
Figure 1: Price/Yield Relationship for a Putable Bond and an Option-Free Bond
Figure 1 shows that curve a - b' and a - a' shows the price/yield relationship of a putable bond and option-free bond respectively. When yield is lower than the coupon rate then price of the putable bond is same as option-free bond because the value of the put option is small. As interest rate increases the price of the putable bond declines but decrease in price is less when compared to that of option-free bond. For a given yield level, the difference between the price of putable bond and comparable option-free bond is the value of a put option.
Would exchange rate changes all time increase the risk of foreign investment? Discuss the condition within which exchange rate changes may actually decrease the risk of foreign inv
Financial Analysis Project: At the beginning of 2009, CanGo purchased the online gaming company. This purchase was for cash, paid for through the proceeds of the
Have the large bank holding companies increased their market share at the expense of smaller institutions? A: No. A study conducted by the Federal Reserve Bank of New York reve
What is the present value of an annuity that makes a quarterly payment of $37,110 for 11 years, assuming an annual yield to maturity of 5%?
Tokyo Stock Exchange In the 1870s, a securities system was introduced in Japan and public bond negotiations began. This resulted in a demand for public trading institution, whi
What are "free cash flows?" Free cash flows signify the total cash flows from business operations that are available to be distributed to the suppliers of a firm's capital each
Illustrate the audit plans Audit team must be sufficiently familiar and fully briefed by manager and have knowledge of the business or operation such that to be able to carry o
What are sources of funds for an assignment?
Briefly explain the accounting concepts which guide the accountant at the recording stage.
Define why we measure a project’s risk as the change in the CV. We calculate a project’s risk as the change in the coefficient of variation since this focuses on the change in
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd