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.
Q. What do you mean by Letter of Credit? A letter of credit is an arrangement whereby a bank helps its customer to obtain credit from its (customer's) suppliers. When a bank op
Mr. X invests Rs. 10000 at 10% p.a compounded semi-annually. Compute value after three years.
The main drawback of the tradition approach of valuation is that it discounts every cash flow using the same discount rate. For example, let us take 5-year (7.00 per ce
How does accounts receivable factoring work? What are the benefits to the two parties involved? What are the risks? Factoring is while one firm sells accounts receivable that i
How do mergers affect small businesses? A: As per to a recent study by Federal Reserve and Wharton Financial Institutions Center economists, not a big deal. Their analysis reve
Define the safety and soundness implications of mergers? A: No. All mergers need regulatory approval and are subject to intense examination through regulators. If anything, the r
Discuss the option of dividend reinvestment plans
State the term- adequate working capital If a firm doesn't have adequate working capital, that is, it doesn't invest sufficient funds in current assets, it can become illiquid
Suppose that the business uses the double declining balance method to depreciate its equipment (a) Determine the net book value, depreciation expense, and accumulated deprecia
After the calculation of cash flow yield and the average life of the asset-backed and mortgage-backed security based on default, prepayment and recovery ass
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