Identify the equity kicker of a convertible security and explain how it affects the value and price behavior of convertibles.
Answer to relevant QuestionsExplain why it is necessary to examine both the bond and stock properties of a convertible debenture when determining its investment appeal. What is the difference between a call feature and a sinking-fund provision? Briefly describe the 3 types of call features. Can a bond be freely callable but nonrefundable? “Treasury securities are guaranteed by the U.S. government. Therefore, there is no risk in the ownership of such bonds.” Briefly discuss the wisdom (or folly) of this statement. Letticia Garcia, an aggressive bond investor, is currently thinking about investing in a foreign (non-dollar-denominated) government bond. In particular, she’s looking at a Swiss government bond that matures in 15 years ...Zack buys a 10% corporate bond with a current yield of 6%. How much did he pay for the bond?
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