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Synopsis
Excerpt from Optimal Timing of Bond Refunding
Bonds frequently contain a provision whereby the issuer can call the bonds before they have matured. Exercise of this privilege requires notice on the order of 30 to As days, and payment of a premium above par specified in the bond itself. Refunding is the Operation whereby a bond is called and redeemed with the proceeds of a new issue. Although not exclusively so, it is usually carried out in order to reduce the interest cost of borrowed funds. It is the purpose of this paper to examine the decision whether to call a bond or to leave it outstanding.
Basically, the refunding decision must weigh the alternatives of continuing payment of the interest on the outstanding bonds, or to make a present payment in the amount of flotation costs and the call premium in order to achieve lower interest costs when these become available.
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Optimal Timing of Bond Refunding (Classic Reprint)
Print on DemandSeller: Forgotten Books, London, United Kingdom
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Paperback. Condition: New. Print on Demand. This book delves into the complex world of bond refunding, a financial strategy where companies call back existing bonds and replace them with new ones, often to reduce interest costs. The author presents a detailed analysis of the decision-making process involved in refunding, offering insights that go beyond the traditional approach of simply comparing interest savings with the cost of the call premium and flotation. The book breaks down the refunding decision into two key frameworks: a fixed horizon model and an indefinite horizon model. Both models incorporate the concept of dynamic programming, a powerful analytical tool for making optimal decisions over time. The author then introduces the concept of discounting, which accounts for the time value of money, and discusses the appropriate discount rates to use in each scenario. A critical element of the book is its analysis of uncertainty. The author acknowledges that future interest rates are inherently uncertain, and proposes using multiple term structures of interest rates, each with a subjective probability, to incorporate this uncertainty into the decision-making process. This approach allows for a more nuanced and realistic evaluation of the potential risks and rewards associated with refunding. The book's insights on the optimal timing of bond refunding provide a robust and insightful framework for making strategic financial decisions, particularly for companies with significant debt obligations. This book is a reproduction of an important historical work, digitally reconstructed using state-of-the-art technology to preserve the original format. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in the book. print-on-demand item. Seller Inventory # 9781332273294_0
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Optimal Timing of Bond Refunding Classic Reprint
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PAP. Condition: New. New Book. Shipped from UK. Established seller since 2000. Seller Inventory # LW-9781332273294
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Optimal Timing of Bond Refunding Classic Reprint
Seller: PBShop.store US, Wood Dale, IL, U.S.A.
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PAP. Condition: New. New Book. Shipped from UK. Established seller since 2000. Seller Inventory # LW-9781332273294
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Optimal Timing of Bond Refunding (Classic Reprint)
Seller: Buchpark, Trebbin, Germany
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Condition: Sehr gut. Zustand: Sehr gut | Sprache: Englisch | Produktart: Bücher. Seller Inventory # 26073661/2
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