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Which of the following statements is most CORRECT?
a. One important difference between warrants and convertibles is that convertibles bring in additional funds when they are converted, but exercising warrants does not bring in any additional funds.
b. The coupon rate on convertible debt is normally set below the coupon rate that would be set on otherwise similar straight debt even though investing in convertibles is more risky than investing in straight debt.
c. The value of a warrant to buy a safe, stable stock should exceed the value of a warrant to buy a risky, volatile stock, other things held constant.
d. Warrants can sometimes be detached and traded separately from the debt with which they were issued, but this is unusual.
e. Warrants have an option feature but convertibles do not.
In real-life companies do not change their capital structure as often as you might think after reading all the capital structure theories. Explain one reason why a firm might not move towards its optimal capital structure even if it knows what that o..
Overton Markets stock has an expected return of 7.8 percent and betas of: βGNP = 1.06; βI = 1.01; and βEx = .52. This expectation is based on a three-factor model with expected values of: GNP growth of 2.6 percent; inflation of 3.1 percent; and expor..
Look at the following Balance Sheet and financial information for Flexics Inc. Flexics, Inc., is a leading producer of plasma technology display devices in the USA. What is the total number of shares in Flexics currently? Based on the Balance Sheet v..
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A 6 year 1500 par bond with 5% semi-annual coupons is sold to yield a nominal interest rate f i convertible semi-annually. If the discount for the bond is 150, calculate i.
Which of the following represent systematic risks?
All of the following are ISO commercial crime coverage exclusions except. A financial instrument that's value is based on an underlying security or commodity is called a/an?
Your brother who is 6 years old, just received a trust fund that will be worth $22,000 when he is 21 years old. If the fund earns 0.11 interest compound annually. What is the value of the fund today?
If a firm desires to finance new projects with 65% retained earnings and 35% debt, what is its weighted average cost of capital (WACC) if its equity’s required rate of return is 14% and its new debt issues are expected to yield 6.5%. The corporation’..
Parramore Corp has $12 million of sales, $1 million of inventories, $3 million of receivables, and $2 million of payables. Its cost of goods sold is 75% of sales, and it finances working capital with bank loans at an 8% rate. What is Parramore's cash..
A bond that pays interest annually yields a rate of return of 7.00 percent. The inflation rate for the same period is 4 percent. What is the real rate of return on this bond?
What would be your future account value (after-tax and after-inflation) if you invested $125 each month into a growth mutual fund for 20 years? Assume an average annual rate of return of 12.5 percent. Assume a combined federal and state income tax of..
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