2.10.5 Put Features

Question 1

What are put bonds?

Answer 1

They allow the investor the discretion to redeem the bonds at par before the maturity date.

Question 2

What makes put bonds attractive to investors?

Answer 2

The fact that they can be redeemed at par and the principal can be reinvested at higher interest rates when the market rates are high.

Question 3

Put bonds also offer protection should the credit rating of the company _____, _____bond prices and ______the chances of default

Answer 3

Deteriorate, reducing, increasing

Question 4

Put bonds carry slightly ____yields than straight bonds (bonds without special features, such as a put option) and save the issuer _____, but they require the issuer to set funds aside for ______

Answer 4

lower, interest expenses, early redemption

Question 5

A put feature is common on __________

Answer 5

Variable rate bonds

Question 6

What are variable rate bonds?

Answer 6

These are bonds in which the interest rates are reset at periodic intervals