Explain who benefits from the option to convert a bond into shares of common stock, and who benefits from the option to call a bond.
Answer to relevant QuestionsExplain why the yield spread on corporate bonds versus Treasury bonds must always be positive. How do these spreads change (a) as the bond rating declines and (b) as the time to maturity increases? Why do bond prices and bond yields move in opposite directions? Using a dividend forecast of $1.24, a required return of 8.5 percent, and a growth rate of 5.3 percent, we obtained a price for National Fuel Gas Company of $38.75. What would happen to this price if the markets required ...Does secondary market trading generate capital for the company whose stock is trading? Explain why the dots in Figure appear to be almost randomly scattered.
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