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!
When an investor purchases non-callable or non-putable convertible bonds, he would be buying a non-callable/non-putable straight security and also buying a call option on the stock, where the number of shares that can be purchased with the call option is equal to the conversion ratio. Therefore, we need to determine the fair value of the call option to determine the value of the convertible bond. The value of the convertible bond is as follows:
We have to add the value of the option to the straight value because the investor purchases a call option on the stock. To get the value of a convertible bond, the value of call option on the bond is to be deducted from the value of convertible security. Therefore, the value is equal to:
The value of the issuer's right to call depends on two factors: (i) future interest rate volatility, and (ii) economic factors that determine whether or not it is optimal for the issuer to call the security. If the callable convertible bond also has putable option, then the formula to determine the value is:
Black-Scholes option pricing model is generally used to determine the theoretical value of a call option. However, in situations where multiple options involving options that depend on future interest rates are considered, Black-Scholes method cannot be used. Researchers have suggested various models for valuation which can be classified under one-factor model or multi-factor models. But, the most common model is the one-factor model based on the price movement of the underlying common stock.
I am facing some problems in my assignment of Cash Management and Inventory Management. Can anybody suggest me the proper explanation for it?
Why investment decision depend on financing decision All these decisions interact, investment decision cannot be taken without taking the financing decision, working capital de
Assume there exists a nontradable asset with a perfect positive correlation along with a portfolio T of tradable assets. How will the nontradable asset be priced? The nontradable
a Suppose you are the TA of Econ 3602 and one student does not know how to derive the DD schedule. Show this student how to derive the DD schedule. Support your answer with equatio
The ability of a firm to satisfy its debt obligations can be assessed using three sets of ratios: Short-term solvency ratios Capitalization
Types of financial incentive schemes Performance associated pay (PRP) systems e.g. piecework or sales commission Bonuses e.g. supplementary payments for targets or ai
what is a perpetuity
Explain about the investment decision- financial management The investment decision relates to selection of assets in which funds would be invested by a firm. Assets which can
Cost of Equity Share Capital (ke) The cost of equity capital is the 'maximum rate of return that the Co. must earn on equity financed portion of its investments in order to go
Case Study - Credit-Linked Notes Credit linked notes are assets issued by financial institutions which have exposure to the credit risk of a reference Issuer . These notes pay
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