When a Company Has a Convertible Bond in Its Capital

question 72

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.

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Definitions:

9%

An interest rate or percentage that signifies a nine percent value attached to financial products or calculations.

Compounded Semi-Annually

The process of adding interest to the principal sum twice a year, where interest earns more interest in subsequent periods.

Compounded Quarterly

Interest is calculated four times a year on the initial principal and the added interest from previous periods.

20 Years

A period or duration of two decades.