Put provision, Financial Management

An issue with a put provision included in the agreement grants the bondholder the right to sell bonds back to the issuer at a pre-specified rate and date. The specified rate is known as put price. Normally the put price is equal or close to the par value of the bond. However, in zero coupon bonds put price is less than the par value. When market interest rate rises above the coupon rate, then the bondholder uses his right under the put provision and forces the issuer to redeem the bond at the put price. He can then invest the proceeds form the bonds in higher interest rate instruments.

Posted Date: 9/8/2012 4:20:27 AM | Location : United States







Related Discussions:- Put provision, Assignment Help, Ask Question on Put provision, Get Answer, Expert's Help, Put provision Discussions

Write discussion on Put provision
Your posts are moderated
Related Questions
a) i = 800 units, ii = 250 units, iii = 60% b) Explanation and Definition of the MOS. Play-it has the better MOS in absolute terms, although Tread-it has the better MOS when mea

Q. Forms of Bank Finance? A firm can draw funds from a bank within the maximum credit limit sanctioned. It can draw funds in the following forms: 1) Overdraft 2) Cash Cre

NPV and Other Criteria Waddington International Inc. has $20 million to invest. It is considering whether to build a new factory in Western Canada. The land and the building wil

Suppose that Harry and Steven make their living selling contraband at opposite ends of a town that is 1 mile long. Because it's a crowded city, the citizens use taxi-cabs for trans

a) Definitions of EST and LFT needed in order to explain the differentiation between the terms. The EST of each activity will depend on the LFT of all preceding activities. b) S

Scenario analysis Your firm, Agrico Products, is considering a tractor that would have a cost of $35,000, would increase pretax operating cash flows before taking account of deprec

Let us consider three scenarios of changes in stock prices and look into the risk return profile of the convertible security. Let us assume that the stock prices

Bonds with Warrants: Warrants are usually attached with the bonds or preference shares to attract the investor. The objective is to induce the potential investors to subscribe

A/A2 is generally the second- or third-highest rating that a rating agency gives to a security or carrier. This rating indicates that there is a comparatively low risk of default a

Q. Explain a variety of factors determining Dividend Policy? Dividend: - Dividend demotes to that part of net profits of a company which is distributed between shareholders as