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
What can a financial institution Frequently do for a deficit economic unit (DEU) that it would have difficulty doing for itself if the DEU were to deal directly along with an SEU?
Accountants should not reverse the adjustment of prepaid insurance to recognize insurance expense at the end of the accounting period because: Answer a. . doing so results in
Q. Explain Dividend Policy Decision? Dividend Policy Decision: - The financial management has to make a decision as to which portion of the profits is to be distributed as divi
Give two examples of types of companies likely to have high operating leverage.Find examples other than those cited in the chapter. Long distance electricity generating compani
Now we can calculate the yield for each possible call or put date. In addition, we can also calculate the yield to maturity. The lowest yield of all these possibl
Your construction company is evaluating the proposed acquisition of a new earthmover. A consulting company you hired developed the following analysis last year at a cost to you of
Irregular Variation As the name suggests, the movement of the variable is random in nature without consistency and therefore, highly unpredictable. Since this type of irregular
Q. Describe the Walters dividend model? Walter's Model: - Walter's model maintains the doctrine that the dividend policy is relevant for the value of the firm. As-per to the Wa
Explain some Examples under FASB 52 that a foreign entity's functional currency would be similar as the parent firm's currency. Answer: Three instances under FASB 52, in which
DEFINITION OF FINANCIAL MANAGEMENT The term financial management has been described by management experts in several ways reflecting the duties and responsibilities of a financ
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