Contrast the Nasdag and National Market System with the OTCBB. Describe the conversion priviege on a convertible security. Explain how the market price of the underiying common stoc affects the market price of a comvertible bond (Wote, Your the page may be in this forman)
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Contrast the Nasdag and National Market System with the OTCBB. Describe the conversion priviege on a convertible security. Explain how the market price of the underiying common stoc affects the market price of a comvertible bond (Wote, Your the page may be in this forman)
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- Consider a security that pays income to its holders (e.g., a dividend-paying stock, or acoupon bond). Should the forward price of this security (for a contract that matures attime T), F0,T, be higher than, lower than, or equal to the security's current spot price?Why?.Discuss how the price of a puttable bond will differ from the price of a similar, plain vanilla bond and the main determinants of this price difference.Briefly describe the following types of derivative securities:1. Swaps2. Structured notes3. Inverse floaters
- Convertible securities can usually be sold with interest rates ____ other nonconvertible securities a. equal to b. with no relation to c. lower than d. higher thanWhich of the following is considered a hybrid security that exhibits the characteristics of both debt and equity? Question 10 options: 1) Bonds. 2) Preferred stocks. 3) Revolving credit agreements. 4) Line of credit. Next PageThe theoretical floor value for a convertible bond is its A. pure bond value. B. onversion price. C. conversion value. D. par value.
- Consider a state-space model for the securities market, with two dates, date 0 and 1, defined as follows: There are two economic states at date 1, state a and state b. The probability for state is 0.52, and the probability for state is 0.48. There is a risk-free bond traded in this market, with the date-1 payoff of $ 110.33, independent of the state. The date-0 price of the bond is $100. There is also a risky stock traded in the market. The date-I payoff of stock is $203.34 in state a and $72.55 in state b. The date-0 price of the stock is $100. Use the above to answer the following (A) - (D). What is the expected net rate of return on the bond? % unansweredIllustrate the effect that market interest rates have on the price of pass-through securities?Explain the principle of immunization when used with a bond portfolio. What is bond portfolio immunization attempting to achieve? How is bond portfolio immunization achieved? Which two (2) bond risk components interact to make immunization successful? Explain how these bond risk components interact to immunize a bond portfolio as interest rates change.
- Suresh Singh, CFA, is analyzing a convertible bond. The characteristics of the bond and the underlying common stock are given in the nearby table. Compute the bond's conversion value (round to dollar and no comma in your answer) Par value Annual coupon rate Conversion ratio Market price Straight debt value Current market stock price Annual cash dividend $1000 6.5% 20 110% of par value 105% of par value $50 $1.1 per shareWhat relationship exists between bond prices and interest rates? Explain how you came to make this link. What approach may we use to determining the bond's value based on this relationship?1. A debenture is: Group of answer choices a secured bond a callable bond an unsecured bond a redeemable bond 2. A convertible bond Group of answer choices comes with a retractable top can be called in for early retirement can be turned in by the investor for early retirement can be swapped for other securities of the issue, typically stock 3. The coupon interest rate: Group of answer choices is the same as the effective interest rate is the same as the market interest rate is smaller than the stated interest rate. is the same as the stated interest rate 4. A bond has a face value of $10,000,000. It has a stated interest rate of 5% and a market interest rate of 6%. It sold for $900,000. It pays interest once a year on December 31. How much interest will the company pay each year? Group of answer choices $500,000 $450,000 $600,000 $540,000 5. A bond has a stated interest rate of 13% and a market…