What is dilution, and why does it occur when warrants are exercised?
Answer to relevant QuestionsWhy do firms issue convertible bonds and bonds with warrants? Eckely, Inc., recently issued bonds with a conversion ratio of 17.5. If the stock price at the time of the bond issue was $48.53, what was the conversion premium? Bernanke Corp. has just issued a 30-year callable, convertible bond with a coupon rate of 6 percent annual coupon payments. The bond has a conversion price of $93. The company’s stock is selling for $28 per share. The ...If a firm is selling futures contracts on lumber as a hedging strategy, what must be true about the firm’s exposure to lumber prices? Suppose a firm enters a fixed for floating interest rate swap with a swap dealer. Describe the cash flows that will occur as a result of the swap.
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