can anyone explain me d difference between Floor Price , Cap Price & Price Band?
meeta mudadi (article assistant) (39 Points)
03 January 2013can anyone explain me d difference between Floor Price , Cap Price & Price Band?
Rikin
(Learner)
(140 Points)
Replied 03 January 2013
CAP & FLOOR are Interest Rate Derivatives.
CAP Rate:- Borrower decides CAP rate in advance beyond which...he will not pay any Interest.
FLOOR Rate:- Investor decides FLOOR rate in advance...In which he decides minimum rate of interest to be received.
Price Band is used when company goes for IPO through book building process...Learned Merchant Bankers and Managers of issue decides Price Band for that shares....Bids are received...Price decided and Shares alloted accordingly...This covers entire chapter of SEBI...but I have tried in Brief :-)
Thanks and Regards.
Ankit Mangal
(CS)
(41 Points)
Replied 04 January 2013
When comapany go for a IPO/FPO Through Book Building Process than Price Band mentuioned in Prospectus For Example -
150 is Floor Price
175 is Cap Price
And CAP rate & Floor Rate also used in Derivatives.
meeta mudadi
(article assistant)
(39 Points)
Replied 05 January 2013
thanx a lot rikin & ankit for explaining so nicely .
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