# Corporate Finance #16 Convertible Bonds & Warrants

Learn about convertible bonds, warrants, and derivative securities from a certified public accountant (CPA)

Language: english

Note: 4.2/5 (24 notes) 17,974 students

Instructor(s): Robert (Bob) Steele

Last update: 2022-02-17

## What you’ll learn

• List common convertible securities
• Explain what convertible securities are
• Explain what warrants and how that can be used
• Describe derivative securities
• Calculate warrant intrinsic value
• Calculate convertible bond conversion value
• Calculate convertible bond conversion premium
• Calculate convertible bond pure bond value

## Requirements

• Basic understanding of corporate finance concepts

## Description

This course will cover convertible securities. We will discuss convertible bonds, warrants, & derivative securities.

We will include many example problems, both in the format of presentations and Excel worksheet problems. The Excel worksheet presentations will include a downloadable Excel workbook with at least two tabs, one with the answer, the second with a preformatted worksheet that can be completed in a step-by-step process along with the instructional videos.

Convertible securities are securities that can be converted from one asset type into another asset type. Convertible bonds are one of the most common types of convertible securities. Convertible bonds have the option, but not the obligation, for a bondholder to convert the bond to some number of stocks.

The conversion feature in convertible securities makes them more difficult to value then other securities. For example, we can attempt to value a convertible bond by calculating the value of the related stock it could be converted into or by valuing bonds of a similar class which do not have a conversion option.

Warrants are an option to buy a set number of shares of common stock at a specified price over a given time.

Derivative securities are financial instruments whose value depends upon the value of another asset. Common examples of derivative securities are futures, forwards, options, and swaps.

## Course content

• Introduction
• 1905 Convertible Securities
• 1910 Warrants
• 1915 Derivative Securities
• Practice Probs. – Convertible Bonds & Warrants
• OneNote Resource
• 1911 Warrants Intrinsic Value & Speculation Premium
• 1913 Warrants Break Even Price
• 1916 Convertible Bond Conversion Value & Conversion Premium
• 1917 Convertible Bond Price & Conversion Value
• 1919 Convertible Bond on Exchange
• 1920 Convertible Bond Pure Bond Value vs Market Price Prob. 1
• 1921 Convertible Bond Pure Bond Value vs Market Price Prob. 2
• 1922 Convertible Bond Change in Price & Conversion Premium
• 1923 Convertible Bond Crossover Point – Conversion Value Equals Pure Bond Value
• 1924 Convertible Bonds & Call Feature
• 1925 Convertible Bond Sale, Gain, & Rate of Return
• 1926 Warrant vs Stock Price % Increase
• 1927 Warrant Exercise & Rate of Return Calculations
• 1928 Exercise Warrant Gain vs Common Stock Gain
• 1929 Warrant Gain vs Stock Gain – Same Investment Amount
• 1930 Convertible Bonds & Diluted Earnings Per Share
• 1931 Convertible Bonds – Pure Bond value Impact vs Conversion Value Impact on Pr
• 1933 Convertible Bonds Pure Bond Value & Falling Stock Price
• Excel Probs. – Convertible Bonds & Warrants
• 1911 Warrants Intrinsic Value & Speculation Premium
• 1913 Warrants Break Even Price
• 1916 Convertible Bond Conversion Value & Conversion Premium
• 1917 Convertible Bond Price & Conversion Value
• 1919 Convertible Bond on Exchange
• 1920 Convertible Bond Pure Bond Value vs Market Price Prob 1
• 1921 Convertible Bond Pure Bond Value vs Market Price Prob 2
• 1922 Convertible Bond Change in Price & Conversion Premium
• 1923 Convertible Bond Crossover Point – Conversion Value Equals Pure Bond Value
• 1924 Convertible Bonds & Call Feature
• 1925 Convertible Bond Sale, Gain, & Rate of Return
• 1926 Warrant vs Stock Price % Increase
• 1927 Warrant Exercise & Rate of Return Calculations
• 1928 Exercise Warrant Gain vs Common Stock Gain
• 1929 Warrant Gain vs Stock Gain – Same Investment Amount
• 1930 Convertible Bonds & Diluted Earnings Per Share
• 1931 Convertible Bonds Pure Bond Value Impact vs Conversion Value Impact on Pric
• 1933 Convertible Bonds Pure Bond Value & Falling Stock Price

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