Explain the limitation of using premium over straight value as a measure of the downside risk of a convertible bond.
Answer to relevant QuestionsThis excerpt comes from an article titled “Bartlett Likes Convertibles” in the October 7, 1991, issue of BondWeek, p. 7: “Bartlett & Co. is selectively looking for opportunities in convertible bonds that are trading ...Assuming the data in the following table for corporate bonds, compute the average hedge ratio (duration multiplier) at the average spread level for the three credit ratings (M1, M2, and M3): Assume the following for corporate bond A: spread duration = 5, credit spread = 100 basis points, and weight in the portfolio = 6%. Answer the below questions. (a) What is bond A’s duration times spread? (b) What is bond ...Answer the below questions. (a) What is the purpose of an interest coverage ratio? (b) What does an interest coverage ratio of 1.8 × mean? (c) Why are interest coverage ratios typically computed on a pretax basis? (d) Why ...Why do credit analysts begin with an analysis of the industry in assessing the business risk of a corporate issuer?
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