Use the following table to indicate whether the characteristic listed refers to

Question

Use the following table to indicate whether the characteristic listed refers to convertible bonds or to stock warrants:

2. If a firm experiences rapid growth subsequent to converitble or bond-with-warrant issues, does that make it more or less likely that the securtites will be converted or excercised?

Characteristic Convertible Bonds Debt with Warrants These fixed-income securtities remain as liabiltites on the company's books after they are exercised. These fixed-income securtities are exchanged for common stock and removed as liabilties from the company's books These securitites tend to have higher flotation costs These securitites tend to be issued by larger, less risky firms

Explanation / Answer

Answer:

Answer:2 Warrants are transferable, quoted certificates, and they tend to be more attractive for medium-term to long-term investment schemes. Tending to be high-risk, high-return investment tools that remain largely unexploited in investment strategies, warrants are also an attractive option for speculators and hedgers. Transparency is high and warrants offer a viable option for private investors as well. This is because the cost of a warrant is commonly low, and the initial investment needed to command a large amount of equity is actually quite small.

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Characteristic Convertible Bonds Debt with Warrants These fixed-income securtities remain as liabiltites on the company's books after they are exercised. No Yes These fixed-income securtities are exchanged for common stock and removed as liabilties from the company's books yes No These securitites tend to have higher flotation costs Yes These securitites tend to be issued by larger, less risky firms Yes

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