When a Company Has a Convertible Bond in Its Capital

question 60

Multiple Choice

When a company has a convertible bond in its capital structure,

• A) it can reduce its debt-to-equity ratio by calling the bond.
• B) there is no effect on the firm's earnings per share.
• C) there is no advantage to the firm in forcing conversion of the bonds.
• D) all of these options are correct.

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Definitions:

Investment Builder

A financial tool or account that aids individuals in growing their savings through various types of investments.

Term Deposit

A fixed-term investment held at a financial institution that pays interest until a specified maturity date.

Simple Interest Rates

The rate at which interest is calculated solely on the initial amount of capital, without compounding.

Principal Investment

The original amount of money invested or loaned, on which basis interest and returns are calculated.