Non-Callable Bond Assignment | Homework For You

Your firm issued 10-year bonds that are callable in 5 years. Thus, your firm has the right to call the debt in five years. In return for the call feature, your firm is paying a higher coupon rate than if the issue were non-callable. Given recent asset acquisitions, you believe the call feature is superfluous and wish to monetize it today. Though the bonds are not currently callable, identify how you could convert the existing callable bond into a synthetic non-callable bond. Explain the mechanics of how your combined synthetic non-callable bond achieves the objective to monetize the embedded call feature. Conversion transaction and Explain. Get Finance homework help today