A Sukuk with an embedded option has 3 months left to maturity. At maturity, sukuk holders...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A Sukuk with an embedded option has 3 months left to maturity. At maturity, sukuk holders can either get back the face value or convert to 1,000 shares of the issuing company. The sukuk's other features are as follows; • Underlying Asset: 12 hectare piece of prime real estate (valued at RM 500 million) Total Issue Size: RM 500 million Number of Sukuks Issued: 50,000 Face Value per Sukuk : RM10,000 Annual Ijarah Payment : 8% Current market Value of stock = RM10.70 Volatility of stock price = 30% Risk free rate = 3.5% ● ● ● ● Suppose you are being offered the above sukuk, if your required yield for the sukuk is 8%, a) What is the value of the embedded option? (8 marks) A Sukuk with an embedded option has 3 months left to maturity. At maturity, sukuk holders can either get back the face value or convert to 1,000 shares of the issuing company. The sukuk's other features are as follows; • Underlying Asset: 12 hectare piece of prime real estate (valued at RM 500 million) Total Issue Size: RM 500 million Number of Sukuks Issued: 50,000 Face Value per Sukuk : RM10,000 Annual Ijarah Payment : 8% Current market Value of stock = RM10.70 Volatility of stock price = 30% Risk free rate = 3.5% ● ● ● ● Suppose you are being offered the above sukuk, if your required yield for the sukuk is 8%, a) What is the value of the embedded option? (8 marks)
Expert Answer:
Answer rating: 100% (QA)
To calculate the value of the embedded option in the sukuk we can use an option pricing model such a... View the full answer
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
Attlee Ltd holds 28% of the issued shares of Nehru Ltd. Attlee Ltd acquired these shares on 1 July 2019 and on this date all the identifiable assets and liabilities of Nehru Ltd were recorded at...
-
Consider a chain of (n 1) regenerative repeaters, with a total of n sequential decisions made on a binary PCM wave, including the final decision made at the receiver. Assume that any binary symbol...
-
A plane wave propagating in the +x-direction with electric field E 0 strikes a thin metal screen at x = 0 and diffracts from a long and narrow horizontal slit (width a) cut out of the screen. The...
-
Using Rayleigh's method, estimate the fundamental frequency for the lateral vibration of a uniform beam fixed at both the ends. Assume the deflection curve to be \[W(x)=c_{1}\left(1-\cos \frac{2 \pi...
-
A few years back, Dave and Jana bought a new home. They borrowed $230,415 at a fixed rate of 5.49% (15-year term) with monthly payments of $1,881.46. They just made their twenty-fifth payment and the...
-
A manufacturer uses activity-based costing to assign overhead cost to products. Budgeted cost information for its activities follows Activity Purchasing Factory services Setup Budgeted Cost $ 175,000...
-
In a paint mixing plant, two tanks supply fluids to a mixing cistern. The height, h, of the fluid in the cistern is dependent upon the difference between the input mass flow rate, q, and the output...
-
Use while-end, i f -end, break commands to solve the numerical problem Write a script file named PBTask3pS.m that sums a sequence of random numbers (use rancin) until the sum is greater than 10. If...
-
Intravenous infusions usually are driven by gravity by hanging the fluid bottle at sufficient height to counteract the blood pressure in the vein and to force the fluid into the body. The higher the...
-
A pump is installed in a vertical well to lift oil from bottomhole to wellhead. Calculate the required pump discharge pressure and output horsepower, given: Reservoir inflow performance relationship:...
-
A 50-ft thick, 30-md permeability sandstone pay zone at a depth of 10000 ft is to be acidized with an acid solution having a specific gravity of 1.07 and a viscosity of 2 cp down a 2-in.-ID coiled...
-
Calculate the production rate of a well in an oil reservoir at time of 40 days. The following data are given: Flowing bottomhole pressure, p wf =2000 psi Porosity,f= 0.25 Oil saturation S oi = 100%...
-
A 0.8-specific gravity oil flows through a 32/64-inch choke. Oil viscosity is 1.0 cp. The flowline size is 1.0 inch. The flow coefficient is 1.05. The downstream pressure is 320 psia. Oil flow rate...
-
Let T: R R be a linear transformation for which Find T 20 and UQ X 2 --- -1 and T
-
Reconsider Prob. 1474. In order to drain the tank faster, a pump is installed near the tank exit as in Fig. P1475. Determine how much pump power input is necessary to establish an average water...
-
For $20 million, Ross Adams Mining acquired a tract of land containing a large deposit of anthracite coal. Ross Adams believes the most economical way to extract the coal is to strip- mine the site....
-
On December 31, 2014, Ball Company leased a machine from Cook for a 10-year period, expiring December 30, 2024. Annual payments of $100,000 are due on December 31. The first payment was made on...
-
The income statement and statement of cash flows for ABC Equipment Company for 2014 are provided below. Supplemental Information: Other current liabilities represent obligations for general and...
-
Using the Adapter examples found in this chapter, create a program as follows: 1. Implement a Citizen Data Base that stores various types of Humanoid instances (Orkan, Romulan, Earthling, and perhaps...
-
What other examples can you imagine that might easily incorporate the Adapter pattern?
-
Why can you not label the static instance() method as virtual in Singleton and override it in President?
Study smarter with the SolutionInn App