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
Q. Define Finance Function and discuss its nature and scope Ans. Meaning of Finance: - Finance is defined as the provision of funds at the time when it is required. The role of

Market Efficiency Though there are various markets present in the financial system, the ease with which the transfer of funds take place depends on the level of efficiency pres

Illustrate the comparison between equity and debt Equity and Debt: A Comparison 1. Equity shares don't carry any fixed charges on them. If company doesn't generate positiv

Our geologist, Rebecca Paulka, has estimated from the earlier exploration that the Malian prospects have a 30% likelihood of containing economic quantities of uranium ore, the Nige

What is Rationale and behind profitability maximisation Rationale & behind profitability maximisation, as a guide to financial decision making, is simple. Profit is a test of e

Interpretations of Profitability Ratio's - ROA:       ROA or the Return on Assets ratio is the ratio of net profit to total assets and this ratio indicates whether total assets

An issue with a put provision included in the agreement grants the bondholder the right to sell bonds back to the issuer at a pre-specified rate

SAM Technology had AED 640,000,000 of retained earnings on December 31, 2012. The company paid common dividends of  AED 30,000,000 in 2012 and had retained earnings of  AED 500,000

How Compound values can be calculated on anannual basis Compound values can be calculated on anannual basis, or on a half-yearly basis or on a monthly basis or on continuous ba

Calculate the Future Value of an Annuity: Annuity is stated as periodic payment every period for a number of periods. This periodic payment is the same each year only then it c