1. What differentiates convertible bonds from other bonds?
2. How is the value of a convertible bond in terms of stock determined? What effect does this conversion value have on the price of the bond?
3. How is the value of a convertible bond in terms of debt determined? What effect does this investment value have on the price of the bond?
4. Why may convertible bonds be called by the firm? When are these bonds most likely to be called?
5. Why are convertible bonds less risky than stock but usually more risky than non-convertible bonds?
6. Why does the premium over the bond’s conversion value decline as the value of the stock rises?
7. How are convertible preferred stocks different from convertible bonds?
8. What advantages do convertible securities offer investors? What are the risks associated with these investments?
9. Why may an investor prefer a debenture with a put feature in preference to a bond with a call feature?
10. If you expected a common stock’s price to appreciate over a period of time, would you prefer to invest in a put bond, a callable convertible bond, or a convertible- exchange-able preferred stock issued by the firm?
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