 In the first part of this lecture, I discuss the position of stockholders and bondholders with reference to a call option on the firm. Now I will discuss the same in terms of a put option. Now let's see that if the firm is expressed in terms of a put option with reference to the stockholders. Now what will be the position of the stockholders? Now if the debt is risk free, the stockholders will own the firm and they will owe rupees $800 to the bondholders carrying the amount of principal and the interest they are on. And if there is a possibility of default, the stockholders will own the put option on the firm with the amount of $800 at the exercise price. Considering these two positions, we have two types of cash flows. The first, the cash flow is less than $800 and the second situation is where the cash flows are over $800. If the cash flows are less than $800, then the stockholders will put or sell the firm to the bondholders. In fact, they are also owing $800 to the bondholders as a debt amount. In this case, although the put holders will receive the exercise price when the asset of the firms are sold. So this exchange is basically is cancelling out the debt and as a result, the stockholders are getting nothing. On the other side, if the cash flows of the firm are over $800, then this put is out of the money. Stockholders will not exercise their options. They will retain the firm's ownership and they will easily pay out the debt and including principal and interest of $800 both to the debt holders of the firm. Now let's see the firm expressed in terms of put option with reference to the bondholders and what will be the position of the bondholders. They are $800 from the firm or the stockholders of the firm. They have sold a put option on this firm to the stockholders against an amount of $800 which is the exercise price in this case. Now if the cash flows of the firms are less than $800, the stockholders will exercise their option rather the put option, bondholders then are obligated to pay the $800 for the firm and they are also to get their debt amount of $800. Now in this case, both the parties are paying to each other the equal amount of $800. So the bondholders amount of $800 and stockholders amount of $800 these two amounts are cancelling of each other claim and as a result the bondholders are simply ending up with the firm. And if the cash flows are greater than the amount of $800, stockholders will not exercise their put options rather the bondholders will merely receive their claim or debt of $800 which is due to them. The bondholders position will be that they are holding a risk less or a default free bond. So they are getting $800 this means that the value of this risky bond is basically equal to the value of the default free bond and the negative value of the put options in or we can say that the equation is expressed as the difference between default free bond value and the put option is basically equal to the value of the risky bond.