:All of the following statements regarding convertible bonds are true except Holders of convertible bonds can choose how many shares of stock to receive at conversion A Holders of convertible bonds can choose when to convert to stock .BO Holders of convertible bonds have the option to not convert and continue receiving bond interest payments and par value at maturity .C O Holders of convertible bonds have the potential to profit from increases in stock price.D O

:All of the following statements regarding convertible bonds are true except Holders of convertible bonds can choose how many shares of stock to receive at conversion A Holders of convertible bonds can choose when to convert to stock .BO Holders of convertible bonds have the option to not convert and continue receiving bond interest payments and par value at maturity .C O Holders of convertible bonds have the potential to profit from increases in stock price.D O

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 4MC: A convertible bond can be converted into ________. A. preferred stock B. common stock and then...

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A convertible bond issue should be included in the diluted earnings per share computation as if the bonds had been converted into common stock, if the effect of its inclusion is Dilutive Antidilutive a. No No b. Yes No c. Yes Yes d. No Yes
When bondholders decide to exercise their convertible bonds, the company values the common stock at the ________. Assume there is no beneficial conversion option at bond issue. Group of answer choices market value of the stock par value of the stock carrying value of the bonds par value of the bonds
Which statement is not correct? A convertible bond is like a bond with a call option. The amount of DPS has negative impact on favorable income differential per share of a convertible bond. The value of a convertible bond cannot be less than its straight value. Exchangeable bonds give the bondholder the right to exchange the bonds for the common stock of the issuer of the bond. The conversion value of a convertible bond is directly related to its market price of common stock.
For the following three types of dilutive securities: convertible bonds, convertible preferred stock, stock options which one (ones) involves security holders paying cash upon the conversion/exercise of the security (securities)? Enter 1, 2, 3, or 4 that represents the correct answer. 1. Convertible bonds and stock options. 2. Convertible bonds and convertible preferred stock. 3. Stock options only. 4. Convertible bonds only.
When dilutive convertible bonds are the only potential ordinary shares, the diluted earnings per share (EPS) will be __________if the bonds are actually converted compared to when they are not converted.A. lowerB. higherC. the sameD. incomparable
When dilutive convertible bonds are the only potential ordinary shares, the diluted EPS will be __________if the bonds are actually converted compared to when they are not converted. A. lower B. higher C. the same D. incomparable
Which of the following statements concerning warrants is CORRECT? JUST EXPLAIN ONE ANSWER WHICH IS INCORRECT. Bonds with warrants and convertible bonds both have option features that their holders can exercise if the underlying stock’s price increases. However, if the option is exercised, the issuing company’s debt declines if warrants were used but remains the same if it used convertibles. Warrants are long-term call options that have value because holders can buy the firm’s common stock at the exercise price regardless of how high the stock’s price has risen. A firm’s investors would generally prefer to see it issue bonds with warrants than straight bonds because the warrants dilute the value of new shareholders, and that value is transferred to existing shareholders.
A company issues Non-convertible bond with Equity Warrants. This security is equal to Preferred stock Call Option Convertible Bond Differential Voting Rights Equity shares
What is a convertible bond? If a company decidesto raise capital by issuing convertible bonds, howwould the terms on the bond be set? Considerspecifically the maturity, coupon rate, and callfeatures of the bond, as well as the conversionprice (or conversion ratio), together with any otherparameters required for the analysis.
3. Convertible bonds, warrants, and other exotic bond features As the name suggests, convertible bonds allow the owner the option to convert the bonds into a fixed number of shares of common stock. Which of the following best describes the difference between a convertible bond and a warrant? Convertible bonds give the investor the option to buy shares at a certain price, whereas warrants give the investor the option to exchange bonds for shares at a certain price. Convertible bonds give the investor the option to exchange bonds for shares at a certain price, whereas warrants give the investor the option to buy shares at a certain price. Consider the case of an investor, Nazim: Nazim wants to include putable bonds in his investment portfolio. Nazim is likely to put the bonds when: He has reinvestment options with higher yields. He has reinvestment options with lower yields. Nazim also recently bought bonds with a clause stating that…
Some financial instruments such as convertible bonds, preferred stocks, warrants and options can have both debt and shareholder’s equity features. They can be converted into common stock or into preferred stocks by investors. This topic has been debated for several years on whether: Viewpoint 1: Issuers should account for an instrument with both liability and equity characteristics entirely as a liability or entirely as an equity instrument depending on which characteristic governs. Viewpoint 2: Issuers should account for an instrument as consisting of a liability component and an equity component that should be accounted for separately. Which of the two viewpoints do you favor? Develop an argument in support of your choice. In considering this question, you should disregard the current position of the FASB on the issue. Instead, focus on conceptual issues regarding the practicable and theoretically appropriate treatment, unconstrained by US GAAP and IFRS. Also, focus your…
Convertible bonds are: I. options attached to bonds that give the bond holder the right to purchase stock at a preset price without giving up the bond. II. bonds in which the issue matures (converts) a little each year. III. bonds collateralized with certain types of automobiles. IV. bonds that may be converted to a certain number of shares of stock determined by the conversion ratio. a. I only b. I and II only c. I, II, and III d. IV only e. I and III only