Matching
Match the following with the items below:
Premises:
The right to buy an asset for a given time at a specified price.
Equals earnings after taxes divided by shares outstanding.
Is usually equal to the "pure value" of a convertible bond.
Sometimes used as a financial sweetener in a bond offering.
This feature, when written into the contract, allows the conversion ratio to decline over time.
The value of a convertible bond if its present value was computed at a discount rate equal to interest rates on straight bonds of equal risk without conversion privileges.
May be traded in to the company for a different form of security.
Equals the conversion ratio multiplied by the market price per share of common stock.
The number of shares an investor will receive if he or she exchanges one convertible bond for common stock.
Occurs when a company calls a convertible security that has a conversion value greater than the call price.
Responses:
convertible security
forced conversion
pure bond value
conversion ratio
step-up in conversion price
floor price
basic earnings per share
conversion value
a call
warrant
Correct Answer:
Premises:
Responses:
The right to buy an asset for a given time at a specified price.
Equals earnings after taxes divided by shares outstanding.
Is usually equal to the "pure value" of a convertible bond.
Sometimes used as a financial sweetener in a bond offering.
This feature, when written into the contract, allows the conversion ratio to decline over time.
The value of a convertible bond if its present value was computed at a discount rate equal to interest rates on straight bonds of equal risk without conversion privileges.
May be traded in to the company for a different form of security.
Equals the conversion ratio multiplied by the market price per share of common stock.
The number of shares an investor will receive if he or she exchanges one convertible bond for common stock.
Occurs when a company calls a convertible security that has a conversion value greater than the call price.
Premises:
The right to buy an asset for a given time at a specified price.
Equals earnings after taxes divided by shares outstanding.
Is usually equal to the "pure value" of a convertible bond.
Sometimes used as a financial sweetener in a bond offering.
This feature, when written into the contract, allows the conversion ratio to decline over time.
The value of a convertible bond if its present value was computed at a discount rate equal to interest rates on straight bonds of equal risk without conversion privileges.
May be traded in to the company for a different form of security.
Equals the conversion ratio multiplied by the market price per share of common stock.
The number of shares an investor will receive if he or she exchanges one convertible bond for common stock.
Occurs when a company calls a convertible security that has a conversion value greater than the call price.
Responses:
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