Callable and putable bonds add options to an ordinary bond. These options may be exercised at the discretion of the bondholder in one type, or the bond issuer in the other. Describe callable and putable bonds
In your description, be sure to include which party has the option to exercise, and the impact of the option on the price of the bond.
What will be an ideal response?
Answer: Callable bonds provide an option to the bond issuer to "call in" the bond prior to maturity at a contractually agreed-upon price during specific time periods. The bond issuer would exercise such an option when interest rates are falling so that debt can be reissued at a lower cost. Thus the price of a callable bond is lower than an otherwise equal bond without the call option attached.
Putable bonds provide an option to the bondholder to sell the bond back to the issuer prior to maturity at a contractually agreed-upon price during specific time periods. The bondholder would exercise such an option when interest rates are rising. Thus the price of a putable bond is higher than an otherwise equal bond without the put option attached.
You might also like to view...
Havermill Co. establishes a $450 petty cash fund on September 1. On September 30, the fund is replenished. The accumulated receipts on that date represent $93 for Office Supplies, $177 for merchandise inventory, and $42 for miscellaneous expenses. The fund has a balance of $138. On October 1, the accountant determines that the fund should be increased by $90. The journal entry to record the reimbursement of the fund on September 30 includes a:
A. Credit to Cash for $138. B. Debit to Office Supplies for $93. C. Debit Petty Cash for $312. D. Credit to Merchandise Inventory for $177. E. Credit to Cash for $450.
If net sales total $50,000, beginning accounts receivable was $10,000, and ending accounts receivable is 16,000, what is the days' sales collected?
A) 73 days B) 96 days C) 118 days D) 192 days
What first step should managers take if they want to improve an organizations’ diversity profile and procedures?
a. Disseminate literature about the importance of diversity. b. Assess the organization’s current diversity status. c. Write a code of ethics that incorporates diversity. d. Terminate employees with poor diversity records.
Which of the following is a customer service measure of convenience?
A. order fulfillment B. ease of return process C. response times to enquiries D. customer complaints