Asked by Nathan Gerlach on May 08, 2024
Verified
A convertible bond is similar to a bond with a put option.
Convertible Bond
A type of bond that can be converted into a predetermined amount of the issuer's equity at certain times during its life, usually at the discretion of the bondholder.
Put Option
A financial contract giving the holder the right, but not the obligation, to sell a specified amount of an asset at a set price within a specified time.
- Understand the working mechanisms of convertible bonds and warrants, as well as their perks for holders.
Verified Answer
KB
karla bencosmeMay 13, 2024
Final Answer :
False
Explanation :
A convertible bond allows the bondholder to convert the bond into a predetermined number of shares of the issuing company, whereas a bond with a put option allows the bondholder to sell the bond back to the issuer at a specified price before maturity.
Learning Objectives
- Understand the working mechanisms of convertible bonds and warrants, as well as their perks for holders.