Finance You own a convertible bond issued by a company and this gives you the option to switch the bond into a number of shares of that company at a date in the future. An event occurs which causes the value of the shares of the company to fall and the future volatility of the price of its shares to rise. The value of your convertible bond should: A Fall because the share price is lower. B Rise because there is more chance the option will be in the money. C Fall because default risk has risen.Fall because default risk has risen. D I do not wish to answer this question. E Could either rise or fall because two offsetting factors have occurred F Be unchanged because there is no reason to think default risk has changed.

Finance You own a convertible bond issued by a company and this gives you the option to switch the bond into a number of shares of that company at a date in the future. An event occurs which causes the value of the shares of the company to fall and the future volatility of the price of its shares to rise. The value of your convertible bond should: A Fall because the share price is lower. B Rise because there is more chance the option will be in the money. C Fall because default risk has risen.Fall because default risk has risen. D I do not wish to answer this question. E Could either rise or fall because two offsetting factors have occurred F Be unchanged because there is no reason to think default risk has changed.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 4QTD

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