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(Concept Problem) A convertible bond is a bond that permits the holder to turn in the bond and convert it into a certain number of shares of stock. Conversion would, thus, occur only when the stock does well. As a result of the option to convert the bond to stock, the coupon rate on the bond is lower than it otherwise would be. A new type of financial instrument, the reverse convertible, pays a higher-than-normal coupon, but the principal payoff can be reduced if the stock falls. Let us specify that the principal payoff of the reverse convertible is FV, the face value, if ST> S0 where S0 is the stock price when the bond is issued. If ST ≤ S0, the principal payoff is FV(ST/ S0). Thus, for example, if the stock falls by 10 percent, ST/S0, the principal payoff, is 0.9FV. Show that this payoff (FV if ST> S0, and FV(ST/ S0) if ST ≤ S0) is equivalent to a combination of an ordinary bond and a certain number of European puts with an exercise price of S0. Determine how many puts you would need.
Of the three widely used inventory costing methods (FIFO, LIFO, and average), the FIFO method of costing inventory is based on the assumption that costs are charged against revenues in the order in which they were incurred.
What is going on in the industry? How are the two firms competing? What are the competitive prospects for the forseeable future?
how does the concept of the time value of money affect decisions made across the four executive roles of management
In each of the following scenarios, an organization receives a contribution in-kind. Prepare journal entries, as necessary, to give them accounting recognition. For each, tell why you made an entry or why you did not.
Determine whether the information that is given is consistent
Topic include financial markets, types of financial intermediaries, the form and methods of stock market operation, the stock market, multinational corporation, foreign exchange rate quotations, trading in foreign exchange, forward and future cont..
What goal should these firms attempt to achieve with regard to their OCs? How and why?
Theory problem based on Merging and acquisition and the wave of bank mergers in the past decade has resulted in substantial industry consolidation
The manager of a Barrier Reef resort wished to know the major determinants of the average daily expenditure by tourists (measured in dollars). From interviews with 18 tourists who have stayed at Great Barrier Reef holiday resorts,
Calculation of Dividend Payout ratio - If the firm follows a residual dividend policy and has no other projects, what is its expected dividend payout ratio?
At what rate of return must the insurance company invest this $35,000 in order to make the annual payments? Use Appendix D for an approximate answer, but calculate your final answer using the financial calculator method. (Do not round intermedi..
On its Web site, one mutual fund company describes its "disciplined and sophisticated investment strategies."- Does given statement convince you to buy Smith mutual funds.
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