Quote:
Originally Posted by frankabegnale
I am unable to understand the following:
Why would a bondholder/investor/lender (all refer to the same entity correct me if I am wrong) agree to the buyback deal at a lower discount rate? I mean why would an investor be attracted by a "lower" rate, discount rate is what issuer pays, so why would an investor want to receive less? Am I missing something here with respect to discount? I know it's a silly question to ask but please help me. Also, discount rate is same as yield. HOW?
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Bondholder/investor/lender is one and the same for bonds.
The "discount" mentioned here is not the yield of the bond.
Here discount is the difference between the book value of the bond and the buyback price.
A "lower discount" means the buyback price is closer to the book value of the bond.