Exam 17: Hybrid and Derivative Securities

A convertible security that cannot be forced into conversion using the call feature is

If a lessee leases (under a financial lease) an asset that subsequently becomes obsolete, it can require the lessor to replace it with an equally productive asset in real term over the remaining term of the lease.

A firm can raise capital by issuing securities such as convertibles, warrants, calls and puts.

Convertible preferred stock and convertible bonds are normally convertible over ________, respectively.

The conversion feature, which can be part of either a bond or preferred stock, permits the firm to raise additional funds at some point in the future by selling common stock, thereby shifting the company's capital structure to a less highly levered position.