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
How and why does working capital influence the incremental cash flow estimation for a planned large capital budgeting project? Explain. Many large projects need additional worki
State about the Quick ratio or acid test Quick ratio = Current assets less inventories /Current liabilities(times) This ratio measures immediate solvency of a busin
Before tax cost of debt and after tax cost of debt; Personal finance problem. David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following inform
"The emphasis on the practice of good corporate governance has brought about more negative than positive implications to public-listed companies". Do you agree with the above st
After estimating the cash flows, the next step is to determine the appropriate interest rate that should be used to discount the cash flows. The minimum return re
How is international financial management different from domestic financial management? Answer: There are three main dimensions that set separately international finance from
Question 1: Explain clearly why "Public Policy Making constitutes a major part of the work of the Government. Question 2: Consider the role of interest groups in public
Project Evaluation The expected value calculations are crucial to project investment decisions. The following example explains the use of probabilities in project evaluation.
Define country risk. How is it different from political risk? Country risk is a broader quantify of risk as compared to the political risk, as the former encompasses political ri
A firm has sales of $6,500, net income of $500, total assets of $12,000, and total equity of $700. Interest expense is $1000. What will be the common-size statement value of the in
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