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I am unable to understand the “part B requirement” especially as it states,
that the debentures are callable by company for conversion by subject to company ordinary share price exceeding 200 centos b/w 1-jan-20X9 and 31-12-20Y1 and puttable for redemption by the debenture holder if share price falls below 100 centos b/w the same dates.
Can you explain this particular issue in easy wordings for me.
As per my understanding
Call option gives the right to buy
Put option gives right to sellWhile reading the examiner answer it says that call option allows company to limit the potential gain to 33 centos (200-167), how can a call option used by company can force debentures holders. Does not call option allows to buy shares ? And if so why Daron will buy its own shares?
Similarly how can a put option used by debenture holders allows them to ask company for redemption if share prices only reaches to 100 centos b/w 01-20X9 and 31-12-20Y1, if debentures holders are using put option it would mean that they have right to sell the shares.
The use of the words callable and puttable is using the words in their normal English rather than the way we use the words call and put when talking about options.
If the debentures are callable for conversion, it means that the company can make the debenture holders convert to shares (i.e. call them in for conversion) if the price exceeds 200 centos.
If they are puttable for conversion by the debentures holders, then it means that the debenture holders are allowed to convert (to put them for conversion) if the price is before 100 centos.
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