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!
In a putable bond, the bondholder has the right to force the issuer to pay off the bond prior to the maturity date. Let us consider the previous example with the assumption that the bond is putable in one year at 98 and see how this put option will affect the cashflows. We see in the Table 1 that when the put option is not exercised, the value at each node is the same as the value of a option-free bond. But, when the put option is exercised, the value at which the put is exercised, i.e., 98 is used for further calculation instead of the value obtained from backward induction. The value produced by this process is higher than the value of the option-free bond because:
Value of the putable bond = Value of the non-putable bond + Value of the put option.
We can rewrite it as follows:
Value of the put option = Value of the non-putable bond - Value of the putable bond
From the illustration, we can determine the value of the put option as follows:
Value of the put option = Rs.100.714 - Rs.101.799 = Rs.-1.065 (the negative sign implies that the issuer has sold the option and the investor has purchased the option.)
Table 1: Valuing a Putable Bond
Partial Income Statement Year Ending 2011 Sales Revenue $350,000 COGS $140,000 Fixed Costs $ 43,000 SG&A E
ABC Ltd. Produces electronic components with a selling price per of Rs.100. Fixed cost amount to Rs.2,00,000/- 5000 units are produced and sold each year. Annual profits amount to
IPO mode in uk
What does an inventory turnover of 3.0 suggest? If inventory is sold for cash instead of on credit, how will this affect the inventory turnover? If a fi s inventory turnover is 4.0
Q. Explain Risk Adjusted Discount Rate Method? In the risk adjusted discount rate method the future cash flow from capital projects are discount at the hazard adjusted discount
What is Control risk That material misstatement could take place and not be detected, or prevented on a timely basis, by accounting and internal control systems. All audits
Treasury bills are the bills, the government issues with maturity period of one year or less than one year. Treasury bills are usually issued as discount securiti
WHAT ARE THE MAIN VIEWS OF WACC PREVALENT IN THE FINANCIAL MANAGEMENT LITERATURE
1. Consider the following cash flows and reversion: There is an $80,000 cash outflow at time zero. BTCFs for years 1-4, respectively, are $10,000, $20,000, $20,000, and $25,000.
Define the General principles of the city code General principles of the city code Information available to all shareholders and shoul
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: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd