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
Roxanne invested $560,000 in a new business 7 years ago. The business was expected to bring in $8,000 each month for the next 26 years (in excess of all costs). The annual cost of
Stock Market indicators: Stock indices can be organized by weighting the sample of stocks. The stock indicators can be of four types: price-weighted average, volume-weighted av
My company paid an extremely high price for the acquisition of another company; the price was recommended by the valuation of an investment bank. We now have financial crisis. Is t
You have $20 to spend on high quality pens and low quality pens. High quality pens cost $5 each and low quality pens cost $2 each. (a) Suppose that you will spend your entire
Q. What is Cost Recovery Method? Cost Recovery Method - METHOD OF REVENUE RECOGNITION that identifies profits after costs are entirely recovered. Normally used only when the to
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
How many types of segments in the mutual fund industry? There are two segments into the mutual fund industry: long-term funds and short-term funds. In Long-term funds bond fund
Ask ques1. How would you judge the potential profit of Bajaj Electronics on the first year of sales to Booth Plastics and give your views to increase the profit? 2. Suggestion rega
Determine the Significance of gearing on shareholders Significance of gearing on shareholders is financial risk for anun-geared and geared company. It means that there is a gre
BigGardens Ltd (BigGardens) is a private company that owns and operates a chain of garden centres in the Bristol area. The company has expanded rapidly over recent years, opening
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