Issuing Convertible Bonds or Bonds with Warrants Is Useful for a Company

question 38

Multiple Choice

Issuing convertible bonds or bonds with warrants is useful for a company of unknown risk because

• A) The effects of risk are opposite on the two value components and tend to cancel each other out.
• B) If the firm is high risk, the option premium will be higher while the straight bond value is fixed.
• C) Only risky companies issued these instruments.
• D) The equity value is dependent on current risks only, not the future risk at conversion.

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Definitions:

Organization's Official Position

A formal statement or stance that an organization takes on a specific issue or topic.

Company's Success

The achievement of desired visions and planned goals, leading to a positive outcome for a company.

Critical Risks And Problems

Significant challenges or threats that could impact the success of a project or venture.

Business Plan

A detailed document outlining the objectives of a business, the strategy and tactics planned to achieve them, and the expected financial performance over a period of time.