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

question 59

Multiple Choice

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

• A)risk affects the two value components of these securities in opposing ways.
• B)if the firm turns out to be high risk,both the option premium and the straight bond value will be high.
• C)generally only well-established,high-grade companies issue these instruments.
• D)the equity value is dependent on current risks rather than future risks.
• E)these securities generally carry significant restrictive covenants.

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