the text is trying to say that jab ek opton embedded bond se deal kartey ho tab yield different hota hai than a straight bond.
callable bond: investor ko nuksan kyuki uske against call hai, bond ka price badne se call hojayega and hence reinvestment risk therefore investor ko jyada return chahiye and hence yield = straigth bond issue price – value of call option. ( use bond pv anf fv method to find yield)
putable bond: putable bond me investor ke pass advantage hai ki price jyada girne se issuer ko bech dena and hence something beneficial comes with a cost therefore the yield for such bond = straight bond flat price+ value of the put
the text is trying to say that jab ek opton embedded bond se deal kartey ho tab yield different hota hai than a straight bond.
callable bond: investor ko nuksan kyuki uske against call hai, bond ka price badne se call hojayega and hence reinvestment risk therefore investor ko jyada return chahiye and hence yield = straigth bond issue price – value of call option. ( use bond pv anf fv method to find yield)
putable bond: putable bond me investor ke pass advantage hai ki price jyada girne se issuer ko bech dena and hence something beneficial comes with a cost therefore the yield for such bond = straight bond flat price+ value of the put