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Basic Question 6 of 10
The benefits convertible bonds offer are:
II. The investor can potentially purchase shares at a lower-than-market price.
III. The issuer does not need to re-pay the debt if the bond is converted.
I. The issue can pay a lower coupon.
II. The investor can potentially purchase shares at a lower-than-market price.
III. The issuer does not need to re-pay the debt if the bond is converted.
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Craig Baugh
Learning Outcome Statements
describe defining features of a convertible bond;
calculate and interpret the components of a convertible bond's value;
describe how a convertible bond is valued in an arbitrage-free framework;
compare the risk-return characteristics of a convertible bond with the risk-return characteristics of a straight bond and of the underlying common stock.
CFA® 2025 Level II Curriculum, Volume 4, Module 28.