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4. Overview of Convertible Securities Convertible Securities Options and Corporate Finance > Convertible Securities Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_section_117&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=di rect&utm_source=boundless

5. A convertible bond is a type of bond that the holder can convert into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price. Convertible preferred stocks are securities that contain a provision in which the holder may convert the preferred into the common stock of the company under certain conditions. Convertible arbitrage involves the simultaneous purchase of convertible securities and the short sale of the same issuer's common stock. Forced conversion usually occurs when the price of the stock is higher than the amount it would be if the bond were redeemed. Overview of Convertible Securities Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/options-and-corporate-finance-16/convertible-securities-117/overview-of- convertible-securities-495- 5676?campaign_content=book_192_section_117&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boun dless Arbitrage View on Boundless.com Options and Corporate Finance > Convertible Securities

6. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

7. Key terms debt gearing debt techniques used to multiply gains or losses; also known as leverage. Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance

8. Arbitrage Arbitrage is the simultaneous purchase and sale of an asset in order to profit from a difference in the price. This diagram illustrates an arbitrage opportunity in foreign currency exchange. Free to share, print, make copies and changes. Get yours at www.boundless.com Wikimedia. "Triangular-arbitrage." CC BY-SA http://commons.wikimedia.org/wiki/File%253ATriangular-arbitrage.svg View on Boundless.comCC BY-SAhttp://commons.wikimedia.org/wiki/File%253ATriangular-arbitrage.svgView on Boundless.com Options and Corporate Finance

9. Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance Which of the following is a correct definition of a feature of convertible bonds? A) Conversion value is the equity price times the conversion ratio. B) Call features is the ability of the bondholder to force the repayment of the loan. C) Put features is the ability of the issuer to call a bond early for redemption. D) The conversion ratio is the number of shares each convertible bond converts into.

10. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Options and Corporate Finance Which of the following is a correct definition of a feature of convertible bonds? A) Conversion value is the equity price times the conversion ratio. B) Call features is the ability of the bondholder to force the repayment of the loan. C) Put features is the ability of the issuer to call a bond early for redemption. D) The conversion ratio is the number of shares each convertible bond converts into.

11. Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance Which of the following is NOT an advantage for an issuer of using convertible bonds? A) Convertible bonds often have lower fixed-rate borrowing costs than other types of bonds. B) Convertible bonds increases a company's liquidity. C) Convertible bonds defers the dilution of shareholder voting power. D) The level of a company's debt gearing is increased.

12. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Options and Corporate Finance Which of the following is NOT an advantage for an issuer of using convertible bonds? A) Convertible bonds often have lower fixed-rate borrowing costs than other types of bonds. B) Convertible bonds increases a company's liquidity. C) Convertible bonds defers the dilution of shareholder voting power. D) The level of a company's debt gearing is increased.

13. Attribution Wikipedia. "Convertible security." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible_securityCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible_security Wikipedia. "Convertible arbitrage." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible_arbitrageCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible_arbitrage Wikipedia. "Convertible bond." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible_bondCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible_bond Wikipedia. "Convertible preferred stock." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Convertible_preferred_stockCC BY-SA 3.0http://en.wikipedia.org/wiki/Convertible_preferred_stock Wikipedia. "debt gearing." CC BY-SA 3.0 http://en.wikipedia.org/wiki/debt%20gearingCC BY-SA 3.0http://en.wikipedia.org/wiki/debt%20gearing Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance