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A Callable Convertible

A Callable Convertible

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Question 4: Explain the Benefits of Issuing Different Types of Bonds** In your own words, explain the benefits a company can receive if they issue the following types of bonds: **A. Callable Bonds:** - Companies may benefit from issuing callable bonds as they allow the issuer to repay the bond before its maturity date. If interest rates decline, the company can call back the bonds and reissue new ones at a lower interest rate, reducing interest expenses. **B. Convertible Bonds:** - Convertible bonds provide companies the advantage of potentially lowering initial interest costs since these bonds offer a conversion option into stock. If bondholders convert their bonds, the company benefits by decreasing its debt obligations and potentially improving its balance sheet.
Transcribed Image Text:**Question 4: Explain the Benefits of Issuing Different Types of Bonds** In your own words, explain the benefits a company can receive if they issue the following types of bonds: **A. Callable Bonds:** - Companies may benefit from issuing callable bonds as they allow the issuer to repay the bond before its maturity date. If interest rates decline, the company can call back the bonds and reissue new ones at a lower interest rate, reducing interest expenses. **B. Convertible Bonds:** - Convertible bonds provide companies the advantage of potentially lowering initial interest costs since these bonds offer a conversion option into stock. If bondholders convert their bonds, the company benefits by decreasing its debt obligations and potentially improving its balance sheet.
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