convertibility

(adjective)

Quality of a bond that allows the holder to convert into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price.

Related Terms

  • indenture
  • public debt offerings

Examples of convertibility in the following topics:

  • Overview of Convertible Securities

    • Convertible securities are convertible bonds or preferred stocks that pay regular interest and can be converted into shares of common stock.
    • A convertible bond (CB) is a type of bond that can be converted into shares of common stock in the issuing company or cash of equal value, at an agreed-upon price.
    • Convertible bonds are usually issued offering a higher yield than obtainable on the shares into which the bonds convert.
    • Conversion ratio: The number of shares each convertible bond converts into.
    • In particular, the equity option embedded in the convertible bond may be a source of cheap volatility, which convertible arbitrageurs can then exploit.
  • Convertible Stock

    • A convertible security, such as convertible preferred stock, is any security that can be converted into another.
    • This refers to any security that can be converted into another security.
    • Convertible securities can include bonds that pay interest or preferred stocks that pay dividends.
    • Accounting principles require the reporting of convertible preferred stock in the same manner as non-convertible preferreds.
    • A public company's preferred stock is designated as convertible if it can be exchanged for common stock.
  • Provisions of Preferred Stock

    • Preferred shares have numerous rights which can be attached to them, such as cumulative dividends, convertibility, and participation.
    • Convertible preferred stock can be exchanged for a predetermined number of company common stock shares.
    • Once converted, the common stock cannot be converted back to preferred status.
  • Answers to Chapter 16 Questions

    • Step 1: Trader converts the convertible markets into euros, calculated below:
    • Step 2: Trader converts the euros into Croatian kunas, shown below:
    • Step 3: Trader converts the kunas back into Bosnian convertible marks, calculated below.
    • As they convert their U.S. dollars into another currency, the supply function for U.S. dollars increases.
  • Accounting for Preferred Stock

    • Convertible preferred stock is preferred stock that is convertible into common stock of the issuing corporation.
    • Convertible preferred stock is uncommon, most preferred stock is nonconvertible.
    • Holders of convertible preferred stock shares may exchange them, at their option, for a certain number of shares of common stock of the same corporation.
    • Differentiate between preferred to dividends, noncumulative, cumulative and convertible preferred stock
  • Preferred Stock Rules and Rights

    • Preferred stock can include rights such as preemption, convertibility, callability, and dividend and liquidation preference.
    • The following features are usually associated with preferred stock: Preference in dividends preference in assets, in the event of liquidation, convertibility to common stock, callability, and at the option of the corporation.
  • Financial Markets

    • Liquidity is people can easily convert an asset into cash with little transaction costs.
    • Cash is the most liquid asset because a person already has money and does not need to convert it to money.
    • Nevertheless, cars and houses are the least liquid assets because owners require time and high transaction costs to convert these assets into cash.
    • People can convert these assets into cash with little transaction costs.
    • Unfortunately, homeowners need time and have high-transaction costs to convert a house into cash.
  • Answers to Chapter 1 Questions

    • Savers can easily convert their deposits into cash.
    • Many assets are technically not money, but the public can easily convert them into money.
    • People can convert some assets to money easily, so they are almost money.
  • Chapter Questions

    • Please calculate the cross-rate exchange rate for the convertible mark (KM) and U.S. dollar for the following exchange rates:
    • A trader at Citibank has 500,000 Bosnian convertible marks (KM) and observes the following exchange rates:
  • Answers to Chapter 11 Questions

    • Do not include the first $1,000 because the person converted a $1,000 of currency into a bank deposit.
    • Do not include the first $5,000 because the person withdrew $5,000 from his checking account and converted it into cash.
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