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 Value of the security to an investor Value of the security to an investor is directly proportional to the return that he is expected to get from that security. Hig

Stable Money Measurement A business entity enters within numerous transactions in which affect the business in varied ways.  Therefore recording, classification and summarizat

Q. Benefits of the proposed policy change? Short-term sources of debt finance comprise overdrafts and short-term loans. An overdraft offers elasticity but since it is technical

Meaning merits nd demerits of modern approch of financial management

Discount Rate Determinants The discount rate is the firm weighted average cost of capital. It represents the opportunity cost of investing creditors and shareholders funds in o

Inventory is sometimes thought of as a necessary evil.  Explain. Inventory ties up funds and these types of funds are not earning an explicit return.  A few inventory is often es

limitations of historical cost

You've just won a huge $100 million lottery.  You've decided to invest your winnings in the following way:  $30 million in real estate,  $30 million in  corporate bonds and $40 mil

Working capital cycle (operating/trading/cash cycle) It is the time between paying for goods supplied and final receipt of cash from their sale. It is desirable to keep cycle a

Q. How to Select the pattern of the investment? When the funds have been procured than a decision about the investment pattern is to be taken. The selection of the investment p