Exam 24: Warrants and Convertibles

Diamond Drill Inc.has 150,000 shares and 15,000 warrants outstanding.A warrant holder can purchase a new share of equity for five warrants and €5.00 per warrant.The equity is currently selling for €27 per share.What would your gain be from exercising the warrants,assuming all are exercised?

A convertible bond has an 7% annual coupon and 10 years to maturity.The face value is €1,000 and the conversion ratio is 35.The equity currently sells for €27.375 per share.Similar nonconvertible bonds are priced to yield 9%.The value of the convertible bond is at least:

A convertible bond has an option value which is equal to:

Kida Consultants currently has 300,000 shares of common outstanding.Firm value net of debt is €3,900,000.Kida has warrants outstanding with an exercise price of €10.How many warrants must the firm have issued if the gain from exercising a single warrant is €8.25?

Diamond Drill Inc.has 150,000 shares and 15,000 warrants outstanding.A warrant holder can purchase a new share of equity for five warrants and €5.00 per warrant.The equity is currently selling for €27 per share.If all warrants are exercised,what will your fraction of ownership be if you owned 20,000 shares originally?

Concerning convertible bonds,which of the following statements is not correct?

A convertible bond is selling for €800.It has 10 years to maturity,a €1,000 face value,and a 10% coupon.Similar nonconvertible bonds are priced to yield 14%.The conversion price is €50 per share.The equity currently sells for €31.375 per share.The conversion premium is:

Concerning convertible bonds,which of the following statements is not correct?

Transfer or expropriation of wealth from bondholders to equityholders is less likely to occur when:

A convertible bond has a 8% annual coupon and 15 years to maturity.The face value is €1,000 and the conversion ratio is 40.The equity currently sells for €20.875 per share.Similar nonconvertible bonds are priced to yield 9%.The value of the convertible bond is at least:

Which of the following would harm the position of a warrant holder?

From the shareholder's point of view,the optimum time to call a convertible bond is when the bond's conversion value is:

A firm has 2,000 shares of equity and 200 warrants outstanding.The warrants are about to expire,and all of them will be exercised.The market value of the firm's assets is €14,000,and the firm has no debt.Each warrant gives the owner the right to buy 1 share at €5.What is the warrant's effective exercise price?

The holders of Xenron Corporation's bond with a face value of €1,000 can exchange that bond for 35 shares of equity.The equity is selling for €22.00.What is the conversion value of the bond?

Warrants are most often issued in combination with:

Diamond Drill Inc.has 150,000 shares and 15,000 warrants outstanding.A warrant holder can purchase a new share of equity for five warrants and €5.00 per warrant.The equity is currently selling for €27 per share.The holder of a €1,000 face value bond can exchange the bond any time for 25 shares of equity.The conversion price is:

Concerning warrants and call options,which of the following statements generally is correct?

An "equity kicker" most often refers to a:

Which of the following would not describe the difference between warrants and call options?

A convertible bond is selling for €1,222.70.It has 10 years to maturity,a €1,000 face value,and a 10% coupon paid semi-annually.Similar non-convertible bonds are priced to yield 8%.The conversion ratio is 40.The equity currently sells for €30.125 per share.Calculate the convertible bond's option value.