fjrigjwwe9r3SDFAQs:FAQCont
ous option. Some issues
also offer what is known as 'Put and Call option.'
Under the Put option, the investor has the option to approach
the issuing entity after a specified period (say, three years), and sell back
the bond to the issuer.
In the Call option, the company has the right to recall its
debt obligation after a particular time frame. For instance, a company issues
a bond at an interest rate of 12 per cent. After 2 years, it finds it can raise
the same amount at 10 per cent. The company can now exercise the Call option
and recall its debt obligation provided it has declared so in the offer document.
Similarly, an investor can exercise his Put option if interest
rates have moved up and there are better options available in the market.