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.
Why the term objective is used for The term is used in a rather narrow sense of what a firm must attempt to achieve with its financing, investment and dividend policy decisions
What are the Objectives of Financial Management To make wise decisions a clear understanding of the objectives that are sought to be achieved in compulsory. Objectives provide
Post-merger EPS and post-mergershare price An estimated post-merger EPS can be calculated by: (Combined earnings) / total shares after merger An estimated post-merger s
Church Inc. is currently enjoying relatively high growth because of a surge in the demand for its latest product. Management expects earnings and dividends to grow at a rate of 25
Present V alue This is the current value of a future payment or stream of payments. The present value is calculated by applying a discount (capitalization) rate to the
Question 1: You hold a diversified portfolio consisting of a Rs.5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.15. You have decided t
Auction Technique Auction is the most common method to sell Government Securities. Other methods include tap sales, syndication and book building process. Presently many countr
What are the primary variables being balanced in the EOQ inventory model? Explain The primary variables mortal balanced in the EOQ model are ordering costs and carrying costs.
Q. Explain about receivables management? Receivable Management: - The term receivables demote to debt owed to the firm by the customers resulting from sale of goods or else ser
Hedge funds are short two types of funding options. Describe in detail what these options are. Describe why these options become more valuable during a financial crisis. During
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