Convertible bonds normally have ________ to permit the issuer to retire or encourage conversion of outstanding convertibles when appropriate.
A) a put feature
B) a call feature
C) a stock purchase warrant
D) a swap feature

Question

Quizplus · Accepted Answer

Convertible bonds typically have a call feature that allows the issuer to retire or call back the bonds at a predetermined price, which can encourage conversion to common stock. This feature also gives the issuer the flexibility to adjust its capital structure and debt levels as needed. A put feature, on the other hand, would give the bondholder the right to sell the bond back to the issuer, which is not typically found in convertible bonds. Stock purchase warrants and swap features are also not common features of convertible bonds.

Convertible Bonds Normally Have ________ to Permit the Issuer to Retire