An American-type option based on bond expires after 90 days. During this period, there is no coupon payment. The current price of this bond is 115 TL for each 100 TL nominal value. The nominal value of the contract is 1 TL and the risk-free interest rate is 11%. If the strike price is 120, calculate the lowest and highest prices of the put option.
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
An American-type option based on bond expires after 90 days. During this
period, there is no coupon payment. The current price of this bond is 115 TL for each 100 TL nominal value. The nominal value of the contract is 1 TL and the risk-free interest rate is 11%. If the strike price is 120, calculate the lowest and highest prices of the put option.
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