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.
Assets Pension insurance companies' assets can be divided into five main investment classes: cash, long-term bonds, stocks, property and loans. The total returns on the assets
decision criteria of profitability index.
Regulatory Framework Abroad A regulatory mechanism, in terms of finance, is the mechanism to regulate the working of the financial system. Its function is to ensure the complia
Factors Affecting cost of capital are elements in the business environment that cause a company cost of capital to be high and low. Figure below illustrative the various primary fa
Types of Government Stocks Issue of Stock through AuctionThe RBI, on behalf of the government, issues notification to auction government securities, stating the amount and time
What role does depreciation play in estimating incremental cash flows? Depreciation expense is a tax deductible expense and thus affects cash flow through its effect on taxes.
What happens when a bank charges discount interest on a loan? While a bank charges discount interest on a loan the required interest payment is subtracted from the loan carries o
Your task is to prepare a presentation for a group of board members who are considering an investment of $100 million in your company. Your presentation will consist of three disti
The authority and duties of members (shareholders) Members and shareholders shall together and severally protect, conserve and actively exercise the supreme authority of the co
ICQ's designed to: Identify possible areas of weakness. Discover existence of internal controls. Questions are framed to highlight situations where: NO su
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