Suppose the manager has now added a new bond with embedded option. You find that the value of the new bond with embedded option is $92. Using your price technique, you find that the value of a normal bond (i.e. option free) with similar characteristics is worth $90 and the value of the option is $2. The embedded option is most likely:

A. Call option

B. Put option

Please circle your answer.Based on your answer, please indicate below by circling whom does the embedded option benefit and explain your answers.

• Issuer
• Investors