convertible bonds
convertible bonds questions and answers
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Q: Finance : How to float fccb ie Foreign Currency Convertible Bonds?
Does any body know the site from where I can get life cycle of an FCCB? Ie how to float and other info
A: I've been doing some research and getting ready to "dip my toes" in the Forex waters...
I've found some good info on currencies at http://forex-trading.bluecollarnews.com/
The info appears to come from some pretty legit and experienced professionals
-Dave
Q: where do I find a list of convertible bonds?
Just a simple list
A: I have a list in my current inventory, but it's for my customers only. I'd suggest calling your nearest Edward Jones rep and ask him what he's got.
--J.
Q: Convertible Bonds "only" available to institutional investors?
Is this true? Or can individuals buy them also?
A: Individual investors can buy convertible bonds.
Q: $30 million in 8 percent convertible bonds?
$30 million in 8 percent convertible bonds
outstanding. The conversion ratio is 50; the stock price is $17; and the bond
matures in 15 years. The bonds are currently selling at a conversion premium of
$60 over their conversion value. If the price of the common stock rises to $23 on this date next year, what would your rate of return be if you bought a convertible bond today and sold it in one year? Assume on this date next year, the conversion premium has shrunk
from $60 to $10.
A: do your own homework, huh?
Q: what is the difference between warrant bond and convertible bond?
as title, could you tell me the difference between warrant bond and the convertible bond? thank you
A: please visit www.bse-india.com you will find answer there
Q: will a company's employee stock option affect dilution of embedded conversion option of convertible bonds?
will an outstanding employee stock option plan affect in any way the dilution factor of the conversion option in a convertible bond? (assuming the convertible bond is not yet issued, and that an investor is contemplating whether or not to buy the proposed issue of convertibles)
A: negative. employee stock options do not affect convertible bonds. The only dilution factor in play for the con bonds is the market.
Q: Are convertible bonds actually credit swaps?
A: No. Convertible bonds are convertible into a specific number of shares of common stock in the company that sold the bonds.
Q: Is the United States Government, particularly the Federal Reserve reducing profits to Bonds and Bond funds?
By offering bailouts to Investment Houses, Mortgage Companies and corporations in trouble, so that they do not have to convert convertible bonds for at least 6 months? Meanwhile, these corporations can invest their borrowed money in the stock market and deriviatives, bouncing stocks, to achieve higher profits at the expense of inflation from the bidding up of commodities?
A: Indeed bond interest rates are dropping because of the Fed's action. They really don't give a damn about creditors. They are more worried about debtors because there are SO MANY of them in the U S. And most of them can't afford even the interest expense on their debts much less the principal, including I might add the U S government itself. Talk about conflict of interest.
Sure! let's bail out all the over extended borrowers. We will just issue another $500 billion in bonds to China to pay for it. No problem. They have to buy the bonds because if they don't they won't be able to sell their crap to us. He He. Who is really taking advantage of whom?
Q: How does a convertible bond work?
I know they can be converted to common stock, but how many shares, and does the bondholder pay anything??
A: When a company issues a convertible bond they usually explain the terms of the bond. Meaning the time it takes to hold the bond until it converts. They also explain the number of shares of common stock one may receive at the conversion date.
Share conversion share amounts may be also determined by the market share price of the common stock @ the conversion date.
Q: What is a good (and free) online source for comparing convertible bond funds?
I'm wondering if there are any good alternatives to going to the library to check out Morningstar. Please provide a link if possible. Thanks...
A: The calamos funds are know for being great convertible funds. If you look www.calamos.com you can see their offerings. CSQ is 25% convertibles, 25% high yield and 50% equity. It normally sells at a discount to NAV and yields about 7%.
Q: Accounting, Convertible bonds with interest, Need help, have exam soon?
Please help me with this Accounting quesion, I tried to solve but I was told that I did wrong.
Ex17-2(Conversion of bonds)Aubrey Inc. issued $5 million of 9%, 10yrs
convertable bonds on June 1, 2004 at 98 plus accrued interest. The bonds were
dated April 1,2004 with interest payable April 1st and Oct 1st. Bond discount
is amortized semi-annually on a straight-line basis. Bond without conversion
privileges would have sold at 97 plus accrued interest.
On April, 2005, 1.5 million of these bonds were converted into 30,000 common
shares. Accrued interest was paid in cash at the time of conversion.
This is what I tried which is I was told incorrect..
Dr.Cash 5125000
Dr.Discount 150,000
Cr.Bond payable 5000,000
Cr.Interest Expense 225000
Cr.Contributed surplus 50,000
A: Okay so I am assuming that you are Aubrey Inc in this example. We are working with $1,500,000 face value bonds which were sold at 98 so you would have received cash of $1,470,000 at the time of issuance with $30,000 bond discount to amortize over the 10 year life. You are converting the bonds on April 1, 2005. So you have already paid interest once and amortized the discount once.
Your entry would be as follows:
DR Bond Payable 1,500,000
DR Interest Expense 67,500
DR Realized Gain 27,000
CR Cash 67,500
CR Discount 27,000
CR Shareholders Equity 1,500,000
The other way is to just eliminate the realized gain and then your shareholders equity would be 1,473,000. Its been a while since I've taken intermediate accounting.
Q: what are 'convertible bonds'?
thx
A: Convertible Bonds are debt instruments that permit the holder to convert the debt in common stock for a predetermined price at some predetermined point in the future. Typically the interest rate on the debt is lower than what one would get from a traditional non-convertible debt instrument. The benefit to the holder of the convertible bond is one gets the coupon (interest) payment from the company as well as potential upside from the stock in the long-run. While a debt instrument, it also places the holder of the instrument above sotckholders in the capital structure in the event the company goes under.
Q: what are the reasons for a company to to redeem bonds? the best answer gets 10 points immediately?
Why might they redeem convertible bonds?
what may happen to the company shareprices when the company redeems bonds?
A: Generally speaking, companies may elect to redeem bonds if they have sufficient cash on hand to do so or if they are able to refinance them for a lower effective yield (after taking into account any call premiums). A convertible bond is a type of bond that can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. Although it typically has a low coupon rate, the holder is compensated with the ability to convert the bond to common stock, usually at a substantial premium to the stock's market value. If a company believes that its stock has substantial upside (beyond its current price, which presumably is below the strike price for the convert), and wishes to minimize the dilution impact of the convertible, then it could try to tender for the convertible notes.
However, in my view, unless a company had excessive cash balances and fairly strong expected future operating cash flows, any attempt to redeem convertible bonds by a company is likely to be viewed negatively by the common shareholders, since most convertible bond investors (who are a fairly savvy bunch, in general) would not tender their bonds if they thought there was significant upside in the shares (as compared to tendering their notes) and no tender offer would ever be launched without fairly good market guidance that such an offer would be accepted.
Q: please, explain to me why anyone would ever buy a REVERSE convertible bond?
isnt it pretty much guaranteed that you will loose money when the convertion takes place?
as the issuer determines the conversion ratio at the time of conversion, on the basis of the marketprice of the underlying stock?
A: The market will price such a bond at its fair value, taking into account the interest paid on the bond *and* the risk of an early unfavourable conversion. Obviously the fair value will be lower for such a bond, than for one which has the same characteristics apart from the early conversion possibility.
Q: Negative coupon bonds - is Berkshire Hathaway the only one?
In 2002, Berkshire Hathaway issued a negative coupon convertible bond, the first bond issue of that type.
The idea was that the convertible feature, which permitted buying Berkshire Hathaway stock in the future, was sufficiently valuable that investors would forgo interest on the bond, and even pay extra for the convertible feature. Since investors are paying the issuer for the privilege of owning the bond, the result is a negative coupon.
My question: Is the original Berkshire Hathaway bond the only negative coupon bond that's been issued? Or have there been others? And if so, where can I find out information on them?
Thanks.
A: Coupon bonds? Yes, I believe BERK was the only company to do a negative COUPON bond.
ST Microengineering issued a negative bullet bond in 2003.
http://findarticles.com/p/articles/mi_qn4196/is_20030810/ai_n10897679
Japanese overnight rates went negative for a prolonged period. They technically did not issue bonds (since this was an interbank rate), but they were still negative.