Last TD - seems that convertible bonds have some serious...

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Convertible bonds are essentially a bond with a stock option hidden inside. Generally, companies with strong credit ratings are more likely to repay convertible debenture investors. If the companies credit rating is downgraded by rating agency, the risk of default may increase making the convertible bonds a very risky investment. Companies offer convertible dept. to raise financing for their companies. The problem with offer convertible bonds is that it makes your company seem very debt heavy and may encounter problems trying to get financing from banks. If the company issuing convertible bonds becomes bankrupt, you may not see a return on your investment. If you hold a convertible bond, you are in a sense a creditor of the company. This can be good as creditors usually get paid off before bond holders but not always. Convertible bonds are unsecured bonds, backed by company's credit rating and profitability. It
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Unformatted text preview: seems that convertible bonds have some serious risk factors that one should consider before you decide to invest in them. Viable strategy especially for a new upstart company that need financial assets now and doesnt have the capital on hand. As a Soldier in the military it is kind of hard to apply what I have learned, but I also own a small business that makes and installs kitchen cabinets. Although my company is small and only employees three works now, when I retire I hope to expand and the principles that I have learned in this course will invaluable. I especially found the role of the financial manager, the concept of present value, the meaning of value and computations of present values of future cash flow capital budgeting methods and techniques to be of significant importance to my company....
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This note was uploaded on 02/01/2012 for the course ECO 202 taught by Professor N/a during the Spring '11 term at Trident Technical College.

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