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
Q. Show the Phase of Traditional Approach? Phase of Traditional Approach: According to the traditional approach the way in which the overall cost of capital and the value of th

Question 1 What is liquidity risk? What are the causes for liquidity risk? Question 2 Explain the powers and functions of SEBI Question 3 Discuss the various categories

The Rise of Derivative Market: In the 1980s, the process of liberalization and deregulation of the financial markets gained momentum when the British and American leadership l

Definition of 'Hedge Fund': An aggressively managed portfolio of investments that uses advanced investment strategies define as leveraged, short, long and derivative positions

Fixed income security is a financial obligation of an entity, which promises to pay a pre-specified amount of money at per-specified date. Debt securities (

Question: Explain: (a) the advantages and disadvantages, to a company, of debt finance over equity finance; (b) the reasons why a company may choose to issue preference s

When a borrower uses repo market for fund financing, he has to deliver the securities to the lender. One way to do this is to deliver the collateral to the lender

A treasury strip can be sold in two parts based on its components. When the investor is empowered with a right to receive the coupon payments on sale of its treas

Stock Exchange of Hong Kong Securities trading in Hong Kong started in 1866; however, the first formal stock market, the Association of Stockbrokers in Hong Kong, was establish

Memorandum Memo to: Blackwater plc Main Board. Subject: Proposed Pollution Control Project. From: Lower down the hierarchy. Date: That'll be the day. On purely non-