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!
When an investor purchases non-callable or non-putable convertible bonds, he would be buying a non-callable/non-putable straight security and also buying a call option on the stock, where the number of shares that can be purchased with the call option is equal to the conversion ratio. Therefore, we need to determine the fair value of the call option to determine the value of the convertible bond. The value of the convertible bond is as follows:
We have to add the value of the option to the straight value because the investor purchases a call option on the stock. To get the value of a convertible bond, the value of call option on the bond is to be deducted from the value of convertible security. Therefore, the value is equal to:
The value of the issuer's right to call depends on two factors: (i) future interest rate volatility, and (ii) economic factors that determine whether or not it is optimal for the issuer to call the security. If the callable convertible bond also has putable option, then the formula to determine the value is:
Black-Scholes option pricing model is generally used to determine the theoretical value of a call option. However, in situations where multiple options involving options that depend on future interest rates are considered, Black-Scholes method cannot be used. Researchers have suggested various models for valuation which can be classified under one-factor model or multi-factor models. But, the most common model is the one-factor model based on the price movement of the underlying common stock.
Along the dimension of security, bonds can be classified into unsecured (straight) bonds and secured (mortgage) bonds. Unsecured bonds have no charge on any speci
Q. Explain about economic order quantity? The economic order quantity (EOQ) model is basis on a cost function for holding inventory which has two terms: holding costs as well a
Cash flow from investing activities The items included in this heading are: Cash payments Cash receipts Acquiring proper
discuss three approaches to short-term financing
Assembling the Divestiture Team: Divestment of a business requires a team of functional experts under the direction of an experienced project manager. The first and foremost ac
cost of capital, Financial Management The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equ
Criticize the flexible exchange rate regime from the viewpoint of the proponents of the fixed exchange rate regime. If exchange rates are fluctuating very frequently, that may
Citilink has a business line currently owns and runs 350 sightseeing buses and has a turnover of $10 million per annum. The current system for allocating jobs to drivers is very i
Return on Investment (ROI) In accounting it is a measure of the earning power of an industries asset. A high return on investments is desirable. ROI is widely described as net
State the term- Dealing with general risk Part of the strategic decision making process is to analyse all risk factors involved with pursuing a specific course of
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