Asked by Crystal Weaver on Jun 29, 2024
Verified
The Ajax Corporation issues bonds that pay a minimum of 6% interest but that can pay more if corporate earnings reach certain specified levels. The holder of the bond may exchange it for stock of the corporation. This bond would be a:
A) callable income bond.
B) convertible participating bond.
C) convertible unsecured bond.
D) convertible secured bond.
Convertible Participating Bond
A type of bond that gives the holder the right to convert it into a specified number of shares of the issuing company and to participate in earnings beyond a specified amount.
Corporate Earnings
The profit a company makes after deducting its operating expenses and taxes, indicative of its financial health.
- Comprehend the legal frameworks surrounding corporate bonds, inclusive of callable and convertible bonds, and their importance in corporate finance.
Verified Answer
MA
mohammad alnowaifJul 02, 2024
Final Answer :
B
Explanation :
This bond is a convertible participating bond because it offers a minimum interest rate with the potential for higher payments if corporate earnings increase, and it can be converted into stock of the corporation.
Learning Objectives
- Comprehend the legal frameworks surrounding corporate bonds, inclusive of callable and convertible bonds, and their importance in corporate finance.
Related questions
Bonds Subject to a Redemption Provision, Which Permits the Corporation ...
__________, Usually Called Debentures, Have Only the Obligation of the ...
Gains and Losses Are Not Recognized When Convertible Bonds Are ...
Generally Convertible Bonds Do Not Pay Interest
Callable Bonds Are Bonds That Can Be Converted into Common ...