Asked by Brandon Dagley on Jun 03, 2024
Verified
Some more "traditional" assets have option-like features; some of these instruments include
A) callable bonds.
B) convertible bonds.
C) warrants.
D) callable bonds and convertible bonds.
E) All of the options are correct.
Callable Bonds
Callable bonds are bonds that can be redeemed by the issuer prior to their maturity date at a specified call price.
Convertible Bonds
Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.
Warrants
Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security, usually equity, at a predetermined price before expiration.
- Distinguish between "traditional" and "exotic" options along with their specific trading platforms.
Verified Answer
MC
maddy cofieldJun 08, 2024
Final Answer :
E
Explanation :
All the options listed (callable bonds, convertible bonds, and warrants) have option-like features. Callable bonds allow the issuer to repurchase the bond before maturity, convertible bonds can be converted into a predetermined number of shares of the issuing company, and warrants give the holder the right to purchase the company's stock at a specified price before the warrant expires.
Learning Objectives
- Distinguish between "traditional" and "exotic" options along with their specific trading platforms.