FIN - Finance FIN 3301 Lecture Notes - Lecture 2: Reinvestment Risk, Credit Risk, Liquidity Risk
10 Jul 2022
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Sbv : session 2 notes: no intermediary between the buyer and the seller, not necessarily a free security. For investors, it"s a way to participate in the company decision making. To convert a bond, the share prices must be above the bond price. The coupon rate is usually lower for convertible bonds: eurobonds are bonds issued in a different currency than the national currency, callable bonds are more used than puttable bonds. Callable bonds contain the option for the debt to be bought back before maturity (by the issuer) when interest is expected to go down. The coupon rate is higher to make it more attractive to investors. The callable price will be a premium price. The contract will typically include clauses about callable date conditions and call price. Puttable bonds gives right to investors to sell back the bond (not attractive to companies): floating rate bonds: the coupon rate isn"t fixed.
