Question: A puttable bond is a bond which may be repaid before maturity at the investor?s option. Sketch a diagram similar to Figure showing the relationship

A puttable bond is a bond which may be repaid before maturity at the investor?s option. Sketch a diagram similar to Figure showing the relationship between the value of a straight bond and that of a puttable bond.

150 125 - Straight bond 100 - Callable bond 75- 50 -

150 125 - Straight bond 100 - Callable bond 75- 50 - 25- 75 25 50 100 125 150 Value of straight bond Value of bond

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