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
Partition of Investment Risk The expected returns and the fluctuation in returns are two factors in evaluating investments. Expected Returns While the actual returns
Calculate the present value and determine the npv, Financial Management. Assume today is 3 December 2009. Helen is 30 years old and has a Bachelor of Business. She is currently em
What risks are associated with direct foreign investment? How do these risks differ from those encountered in domestic investment?
Definition of cost of capital In analyzing the cost of capital it is presumed that business risk of the firm remains unchanged (i.e., that projects accepted don't affect the va
Q. What do you mean by Collateralized Mortgage Obligation? Collateralized Mortgage Obligation (CMO) - SECURITY whose cash flows equal the difference between cash flows of colla
Q. Explain Systematic Risks in Financial management? Systematic risk in non-diversifiable and is associated with the securities Market as well as economic, sociological, politi
ADVANTAGES OF BUDGETARY CONTROL 1. Profits are maximizes. 2. It makes easy the controlling of activities. 3. Effective co-ordination is made achievable. 4. Executive
Discuss the benefits and drawbacks of maintaining multiple manufacturing sites like a hedge against exchange rate exposure. Answer: To set up multiple manufacturing sites can
Q. Can you explain about Finance function? Finance function is the most important function of the all business function. It remains a focus of the all activity. It is not possi
For what kinds of needs do you think a firm would issue securities in the money market versus the capital market?
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