Module: | Primary Categories & SPPI Rules
Q6: Consider the following statements regarding the classification of bonds with put options:
Assertion (A) - A bond with a put option can be classified under the Held to Maturity (HTM) category if the bank has the intention to hold it to maturity.
Reason (R) - The exercise of a put option prior to maturity is generally consistent with the objective of holding to maturity.
Reason (R) - The exercise of a put option prior to maturity is generally consistent with the objective of holding to maturity.
✅ Correct Answer: C
Assertion (A) is true: A bond with a put option can be classified under HTM if it meets the SPPI criteria and the bank intends to hold it to maturity.
However, Reason (R) is false.
According to RBI Investment Norms, exercising a put option prior to maturity is generally not consistent with the HTM objective and would be treated as a sale in these Investment Classification MCQs.
However, Reason (R) is false.
According to RBI Investment Norms, exercising a put option prior to maturity is generally not consistent with the HTM objective and would be treated as a sale in these Investment Classification MCQs.