Kurt has researched T-Tek and believes the firm is poised to vastly increase in value. He has decided to purchase T-Tek bonds as he needs a steady stream of income. However, he still wishes that he could share in the firm's success along with the shareholders. Which one of the following bond features will help him fulfill his wish?

Question

Quizplus · Accepted Answer

A warrant is a bond feature that allows the bondholder to purchase a certain number of the company's shares at a specified price for a specific period of time. Therefore, if the company's value increases as Kurt anticipates, he can exercise his warrant and purchase shares at a discounted price, allowing him to share in the firm's success as a shareholder while still receiving income from the bonds.

Kurt Has Researched T-Tek and Believes the Firm Is Poised