--%>

Convertible Bonds-Corporate Bonds

State the term Convertible Bonds in Corporate Bonds?

E

Expert

Verified

Convertible Bonds:

• Such are bonds which can be transformed into shares of common stock at certain predetermined ratio at the discretion of bondholder.

• The convertible feature permits the bondholders to share in good fortunes of the firm when the firm’s stock increases above some level.

• The conversion ratio is set and hence the firm’s stock price should appreciate 15 to 20 % before it is gainful to transform bonds into equity.

• To secure this benefit, bondholders would be willing to recompense a premium.

   Related Questions in Corporate Finance

  • Q : Problem on EBIT ABC Corporation stock

    ABC Corporation stock sells at $27 per share and its dividend per share is $1.20. ABC has price-earnings ratio of 16. The company contains $40 million worth of bonds, selling at par, with 8.5% coupon. The EBIT of ABC is of $12 million and its tax rate is 30%. Calculat

  • Q : Finance A middle income worker, with a

    A middle income worker, with a dependent spouse older than the normal retirement age, retired in January 2004. In the year prior to retirement, her gross monthly earnings were $1,500. Her Social Security pension benefit is $1,000 per month. Prior to retirement, she was subject to total taxes on her

  • Q : Financial statements The concept of

    The concept of conservatism has been influential in the development of accounting theory and practice.  A major effect of conservatism is that accountants tend to recognize losses but not gains.  For example, when the value of an asset is impaired, it is wri

  • Q : Why do a Split Why do a Split?

    Why do a Split?

  • Q : How can auditor spot acts of creative

    How can auditor spot acts of creative accounting? Means let an illustration, the excess of provisions or the non-elimination of intra group transactions along with value added.

  • Q : Yield to maturity problem Jenny is

    Jenny is looking to invest in some 5-year bonds which pay annual coupons of 6.25 % and are presently selling at $912.34. What is the present market yield on these bonds? (Round to the closest Answer.) (1) 9.5%  (2) 8.5%  (3) 6.5%  (4) 7.5%

  • Q : Vanilla Bonds-Corporate Bonds Define

    Define the term Vanilla Bonds regarding Corporate Bonds?

  • Q : Earnings management What do you mean by

    What do you mean by Earnings management and what are their actions and activities?

  • Q : Who published a book regarding

    Who published a book regarding option formula and risk neutrality?

  • Q : Convertible Bonds-Corporate Bonds State

    State the term Convertible Bonds in Corporate Bonds?