Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 10 - Reporting and Analyzing Liabilities - Questions: 11

Answer

Step1: Convertible bond Step2: The features of convertible bonds attracts both to the bondholders and the issuing companies. The bondholder is benefited by getting common stock, which command higher market price.

Work Step by Step

Step1: Bonds that can be converted into common stock at the bondholder's option are called convertible bonds. Step2: For the issuer company, bonds sells at higher price in the market and pay lower interest rates, than other competitive bonds that do not have a conversion option. Further, the issuer company has not to arrange for cash to pay on maturity.
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