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Why are convertibles and bonds with warrants typically offered with lower coupons than similarly rated straight bonds?
Fundamentals Of Financial Manageme...
Solutions
Fundamentals Of Financial Manageme...
Why are convertibles and bonds with warrants typically offered with lower coupons than similarly rated straight bonds?
To identify: The reason to offer bonds and convertibles with the warrants at lower coupons than similarly rated straight bonds.
Introduction:
Convertible Bonds: Convertible bonds refer to the debt instrument with an additional feature that it can be converted into equity or preference shares as per the opinion of the holder.
Explanation of Solution
- Holders of convertibles have an option to convert their holdings into equity shares.
- Holders of bonds with warrants have an option to purchase stated number of shares at a given price up-to the maturity date...
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