Which of the following statements about convertible bonds is correct? Before conversion, convertible bonds are treated as equity because they can be potentially converted to equity shares. Holders are more likely to convert bonds to equity shares if stock price declines significantly. Upon conversion, a gain or loss will be recognized. The company who sells convertible bonds will pay interest at a lower interest rate.

can a convertible bond ever result in the recognition of a gain in the income statement?

When a corporation invests borrowed money in assets that generate profits greater than the after-tax cost of the debt, it increases the return on equity for common shareholders. creates financial leverage. has a mix of debt and equity in its capital structure. does all of these options.   If the effective rate of interest is greater than the contract rate, the bonds will sell at par. a premium. a discount. any of these choices, depending on other circumstances.

1. Why do high yield fixed income investors favor PIK bonds for companies who are about to enter a restructuring

Explain why company managers might choose to issue zero-coupon bonds instead of interest-bearing bonds or coupon bonds instead of zero- coupon bonds? Give pros and cons of each. Be sure to consider the situation from the bond issuer's viewpoint and not the bondholder.