Call risk, Financial Management

We have seen earlier that there are callable bonds. This is a valuable feature for the issuers who consider that their stock is undervalued enough so that selling the stock directly would dilute the equity of current stockholders. The company will set the conversion ratio based on a stock price it regards as acceptable. When the market price reaches the conversion point, the issuer will want to see the conversion happen in view of the risk that the price may drop in future. This motivates the company to go for conversion even though this is not in the interest of the owners of the security whose price is likely to be adversely affected by the call.

Posted Date: 9/10/2012 7:59:35 AM | Location : United States







Related Discussions:- Call risk, Assignment Help, Ask Question on Call risk, Get Answer, Expert's Help, Call risk Discussions

Write discussion on Call risk
Your posts are moderated
Related Questions
What is the primary advantage to a corporation of investing some of its funds in working capital? By investing in working capital a firm acquires the liquidity it requirements he

Why do analysts calculate financial ratios? Ratios are comparative measures.  For the reason that the ratios show relative value, they permit financial analysts to compare inf

Price an Asian call option with on a stock with the initial stock price $50 and volatility 30$. The strike price of the option is $52. The time to maturity of the option is 3 month

a) Definitions of EST and LFT needed in order to explain the differentiation between the terms. The EST of each activity will depend on the LFT of all preceding activities. b) S

Can a business have a positive accounting profit and a negative economic profit? Please explain.

A cash-flow yield is the discount rate that makes the price of a mortgage-backed or asset-backed security equal to the present value of its ca

Q. What do you meant by Yield? Investment should be in such securities which yield the highest return. However, safety should not be sacrificed at the expense of yield. How

Cyclical Variation By cyclical variations, we refer to the long-term movement of the variable about the trend line. Therefore, does the movement of the actual series about a tr

38. The optimum capital structure is the one with i) highest value of the firm ii) Lowest value of the firm iii) highest shares in numbers iv) highest debt

(a) Find the nominal rate of interest j compounded quarterly which is equivalent to a 5% e ective rate of interest. (b) Which one will deliver a higher future value on a deposit