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!
Yield to put is the rate at which the present value of cash flow to the first put date is equal to the price plus interest rate. It is used for putable security. It is also similar to yield to call. The assumptions under the yield to put calculation are:
Any interim coupon payment can be reinvested at the yield calculated.
The bond will put on the first put date.
For example, assume a Rs.100 par value, 7% 5-year bond is selling for Rs.104.66 and putable at par at the end of three years. If the bond is put at the end of three years then the cash flow will be like this:
Table 1: Showing Cash Flows in Different Year
Year
Receipts
Total Receipts in the Year Rs.
1st year
Two coupons of Rs.3.50 each
7
2nd year
3rd year
Two coupons of Rs.3.50 each + put price 100.00
107
The present value for interest rates is shown in table 6. It is very clear from the table that 5.30% annual rate makes the present value of the cash flow equal the price of Rs.104.66. So 5.30% is the yield to put.
Table 2
Annual Interest Rate (%)
Semiannual Interest Rate (%)
Summated PV of 6 Cash Flow Payments of Rs.3.50 each (Rs.)
PV of Rs.100.00 (Rs.)
PV of Cash Flow (Rs.)
4.90
2.45
19.3107
86.48
105.79
5.10
2.55
19.2462
85.98
105.22
5.20
2.60
19.2141
85.73
104.94
5.30
2.65
19.1821
85.48
104.66
In all previous illustrations, we assumed that coupon payments are paid on annual basis. However, most of the bonds carry interest payment semi-annually. Semi-ann
It is a trust developed by a married couple with the purpose of minimizing estate taxes. An A-B trust is a trust that splits into two on the death of the first spouse. It is produc
a) A product portfolio is the range of products that a business owns or the strategic business units owned by a firm. In bigger firms, like as Virgin, a broad product portfolio mig
a) Distinguish among standard costing and budgetary control. (b)"Calculation of variances in standard costing is not an end in itself, but a means to an end" Brief discussion
FACTORS AFFECTING WORKING CAPITAL NEEDS OF FIRMS A large no. of reasons influences the working capital requirements of firms. a number of them are as follows: 1. Nature of
Introduction to financial management: Meaning and defecation of the financial management Finance function Scope and content of financial function Functions and
A regional division of a water company is upgrading its water filtration & purification plant; the new system is expected to last 20 years & to cost $40m. The parent company has ha
The cash flows from a portfolio of US standard mortgages have the characteristic of being uncertain. The cash flows from the mortgage consists of three comp
A company has a total investment of Rs 500,000 in assets, and 50,000 outstanding ordinary shares at Rs 10 per share (par value). It earns a rate of 15 per cent on its investment, a
The burden of a tax is shared by producers and consumers. Under what conditions will consumers pay most of the tax? Under what conditions will producers pay most of it? What det
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