Question

True or False

Convertible bonds can be exchanged for common stock at the option of the company.

Answer 1

Convertible bond :- a convertible bond is a fixed income debt securities that is interest payment, but can be converted into a predetermined number of common stock or equity shares. the conversion from the bond to stock can be done at certain times during the bonds life and is usually at the description of the bond holder.

Convertible bonds are the flexible financing option per companies. a convertible bond offers investors a type of hybrid security, which has features of a bond such as interest payment will also providing the opportunity of owning the stock.

At the time of issue of convertible bonds, the company estimate the number of bonds will convert into the stock and provide required provisions and will make required disclosures in the reporting of financial matters of the organisation.

for another reference we can take the calculation of diluted earnings per share, if any organisation issued convertible bonds and those bones are not yet converted into stock. In this situation even though the bonds are not converted into stock the company calculate diluted earnings per share by considering the dilution which comes from conversion of bonds into stock. In this way, we can also so understand the option of converting the convertible bonds is in the hands of buyer or holder of the bond.

Hence, the conversion option of the convertible bond is in hands of holder or buyer of the bond.

By all the above explanation we can conclude that, convertible bonds can be exchanged for the common stock at the option of buyer or holder of the convertible bond.

By all the information we can say the given statement is false.

Answer : false

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