Question: 1. What are convertible bonds? How do they benefit both the investor and the issuer?
2. How do we calculate the issue price of bonds? Is it equal to the present value of the principal? Explain.
3. Explain the difference in each of these terms used for bonds:
a. Face amount and carrying value.
b. Stated interest rate and market interest rate.
4. If bonds issue at a discount, is the stated interest rate less than, equal to, or more than the market interest rate? Explain.