It is nearly always a debenturean unsecured bondwith

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Unformatted text preview: early always a debenture—an unsecured bond—with a call feature. Because the conversion feature provides the purchaser with the possibility of becoming a stockholder on favorable terms, convertible bonds are generally a less expensive form of financing than similar-risk nonconvertible or straight bonds. 684 PART 6 Special Topics in Managerial Finance The conversion feature adds a degree of speculation to a bond issue, although the issue still maintains its value as a bond. Convertible Preferred Stock convertible preferred stock Preferred stock that can be changed into a specified number of shares of common stock. straight preferred stock Preferred stock that is nonconvertible, having no conversion feature. Convertible preferred stock is preferred stock that can be changed into a specified number of shares of common stock. It can normally be sold with a lower stated dividend than a similar-risk nonconvertible or straight preferred stock. The reason is that the convertible preferred holder is assured of the fixed dividend payment associated with a preferred stock and also may receive the appreciation resulting from increases in the market price of the underlying common stock. Convert...
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This document was uploaded on 01/19/2014.

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