In relation to a convertible arbitrage trade in general, carefully explain the impact of a potential takeover/acquisition of the company that issued the convertible bond on the convertible arbitrage trade. Also, compare and contrast the effectiveness of a change of control put (at par) versus a ratchet table.

In relation to a convertible arbitrage trade in general, carefully explain the impact of a potential takeover/acquisition of the company that issued the convertible bond on the convertible arbitrage trade. Also, compare and contrast the effectiveness of a change of control put (at par) versus a ratchet table.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 6MC: A security in a portfolio of available-for-sale securities is transferred to the trading category....

See similar textbooks

Similar questions

Which of the following statements is correct? a. IFRS separates the proceeds of a convertible bond between debt and equity by determining the fair value of the debt component before the equity component. b. Both IFRS and GAAP assume that when there is choice of settlement of an option for cash or shares, share settlement is assumed. c. IFRS separates the proceeds of a convertible bond between debt and equity, based on relative fair values. d. Both GAAP and IFRS separate the proceeds of convertible bonds between debt and equity. 3. Under IFRS, convertible bonds:
With regard to the measurement of a convertible bond issue, which of the following statements is correct?a. IFRS requires the use of the relative fair value method for the bond and the convertible feature b. IFS requires all proceeds be recorded as debt. c. ASPE would not allow the entire proceeds to be credited to bonds payable d. ASPE provides that the amount paid in associated with the conversion feature be either valued at zero or at the differencebetween the amount paid in and the fair value of the bond only as contributed surplus. e. None of the above.
A security in a portfolio of available-for-sale securities is transferred to the trading category. The security should be transferred between the corresponding portfolios at: a. book value at date of transfer if higher than the fair value at date of transfer b. fair value at date of transfer, regardless of its cost c. cost, regardless of the fair value at date of transfer d. lower of its cost or fair value at date of transfer
Which statement is incorrect? * Dilution of EPS is the decrease in EPS when convertible instruments are converted to ordinary shares The purpose of diluted EPS is to provide a comparison figure for creditors. Dilutive convertible securities must be used in the computation of diluted EPS but not in basic EPS. Antidilutive securities should be ignored in all EPS calculations. none of the above
Which statement is incorrect? * A. Dilution of EPS is the decrease in EPS when convertible instruments are converted to ordinary shares B. The purpose of diluted EPS is to provide a comparison figure for creditors. C. Dilutive convertible securities must be used in the computation of diluted EPS but not in basic EPS. D. Antidilutive securities should be ignored in all EPS calculations. E. none of the above
Contrast the Nasdag and National Market System with the OTCBB. Describe the conversion priviege on a convertible security. Explain how the market price of the underiying common stoc affects the market price of a comvertible bond (Wote, Your the page may be in this forman)
How is the potentially dilutive effect of convertible preferred stock reflected in EPS calculations by the if-converted method? How is this different from the way convertible bonds are considered?
Which of the following statements about convertible bonds is correct? Before conversion, convertible bonds are treated as equity because they can be potentially converted to equity shares. Holders are more likely to convert bonds to equity shares if stock price declines significantly. Upon conversion, a gain or loss will be recognized. The company who sells convertible bonds will pay interest at a lower interest rate.
Evaluate the following statement: Issuing convertible securities represents a means bywhich a firm can sell common stock at a price above the existing market price.
The fair value option allows a company to report most financial instruments at fair value at each reporting date. record the unrealized gains and losses related to changes in the fair value of available-for-sale debt securities in net income. account for held-to-maturity securities at amortized cost. all of these choices are true of the fair value option.
All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except: a. the model for recognizing stock-based compensation. b. the calculation of basic and diluted EPS. c. the accounting for convertible debt. d. the accounting for modifications of share options, when the value increases.
Which statement is incorrect? a. Shares, issued in exchange for the settlement of a liability, are included in EPS calculation from the settlement date. b. Shares, that will be issued upon the conversion of a mandatorily convertible instrument, are included in the calculation of basic EPS from the date the contract is entered into. c. Contingently-issuable shares are treated as outstanding, and are included in the calculation of basic EPS from the date when all necessary conditions are satisfied. d. none of the above