The advantages of issuing convertible securities. Introduction: Convertible securities: It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

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Answer 1

Question

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

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Students have asked these similar questions

a. In what ways does an MTN differ from a corporate bond?b. What derivative instrument is commonly used in creating a structured MTN?

9. Which of the following is least likely to be a debt security? a. Government bonds b. Convertible bonds c. Collateralized debt d. Convertible preferred share e. None of the above

Why do convertible bonds referred to as potential common shares?

Answer 2

Question

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

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Answer 3

Question

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

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Answer 4

Question

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

Answer 6

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

Answer 7

Chapter 19, Problem 1DQ

Summary Introduction

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Answer 8

Expert Solution & Answer

Answer to Problem 1DQ

The benefits of issuing convertible securities to a company are:

a. The rate of interest for a convertible security is lower than that on a non-convertible one.

b. It is the only security that provides the small firm an access to the capital markets.

c. These securities let the firm to sell the stocks at a price higher than its issue price.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The benefits of issuing convertible securities to a corporation are:

1. Fixed and limited income will be received by the convertible bondholders until the time of conversion.

2. Bondholders do not have the right to vote for the directors. In case the management of the organization is worried about losing control in voting or requires another means of financing than selling convertible bonds will be more beneficial than the usage of common stock for funding purposes.

3. Interest on the bond is considered as a deductible expense for any issuing company.

4. Companies as per their convenience can sell convertible bonds at a much lower rate than the standard bond. The reason behind this is that the corporation has the option to purchase stock.

5. The debt-to-asset ratio declines when a bond is converted into stock in case the bond is called at a price higher than its conversion price.

Answer 12

Ch. 19 - Prob. 1DQ Ch. 19 - Prob. 2DQ Ch. 19 - Why is it said that convertible securities have a...Ch. 19 - Prob. 4DQ Ch. 19 - Prob. 5DQ Ch. 19 - Prob. 6DQ Ch. 19 - Explain the difference between basic earnings per...Ch. 19 - Prob. 8DQ Ch. 19 - Prob. 9DQ Ch. 19 - Prob. 10DQ

The advantages of issuing convertible securities. Introduction: Convertible securities: It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Videos

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Answer to Problem 1DQ

Explanation of Solution

Want to see more full solutions like this?

Chapter 19 Solutions

The advantages of issuing convertible securities. Introduction: Convertible securities: It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Videos

To explain: The advantages of issuing convertible securities. Introduction: Convertible securities: It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.

Answer to Problem 1DQ

Explanation of Solution

Want to see more full solutions like this?

Chapter 19 Solutions

To explain: The advantages of issuing convertible securities.

Introduction:

Convertible securities:

It is a kind of security which as per convenience can easily be converted into another security according to the discretion of the security holder.