A convertible bond is a bond the investor can exchange for a specific amount of company stock at a later date. It combines a bond and a call option.
The amount of stock that a bondholder can acquire is subject to a pre-determined formula.
Rights are offers that allow existing stockholders to buy additional shares at a predetermined price, for a set time period. Usually, the number of shares the investor can purchase are in proportion to the amount of stock he or she already owns.
A zero-coupon bond or ‘no coupon’ bond is one that does not disburse regular interest payments. Instead, the investor buys the bond at a steep discount price; that is, at a price lower than its face value. When the bond matures, the investor receives the principal amount or face value. Common zero-coupon instruments include U.S.
Learn more about this derivative security.
Find out how this method of debt investment is used to finance various levels of government and private companies.
Call options offer investors a way to leverage their capital for greater investment returns. Find out more about these financial contracts and how they work.
A sinking fund is a way for companies to pay off part of their bond issue before it reaches maturity. By eliminating its debt gradually, the bond issuer is more likely to attract investors concerned about default risk.
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