Question
A bond can be redeemed by its owner for its face value after either 5 or 10 years. So at the end of 5 years,
A bond can be redeemed by its owner for its face value after either 5 or 10 years. So at the end of 5 years, the bondholder must make a one-time choice to either redeem the bond then or let it continue for 5 more years. This complex financial security can be described as
a. 10-year straight bond plus a 5-year call option on it
b. a 10-year straight bond plus a 5-year put option on it
c. a 5-year straight bond plus a 5-year call option on another 5-year straight bond
d. a 5-year straight bond plus a 5-year put option on another 5-year straight bond
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