Question

Which of the following best describes a convertible bond issue? a. a bond that can be...

Which of the following best describes a convertible bond issue?

a. a bond that can be converted into a currency other than the one it was issued in

b. a bond that offers a fixed rate coupon that can be converted into a variable rate coupon

c. a bond that offers the investor the option of converting his or her bond into a fixed number of common shares within a predetermined period of time

d. a bond that offers investors a perpetual dividend in the event that the firm performs better than expected

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Answer #1

The following best describes a convertible bond issue:

"c. a bond that offers the investor the option of converting his or her bond into a fixed number of common shares within a predetermined period of time"

Note: Convertible bonds are those bonds that provide the option to bondholders to convert their debt investment into owners investment in a company by converting bonds into common shares in future. Bondholders can execute the option within a predetermined period of time.

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