Other Options

We've discussed two of the more common optionlike securities, warrants and convertibles. Options appear in many other places. We briefly describe a few in this section.

The Call Provision on a Bond As we discussed in Chapter 7, most corporate bonds are callable. A call provision allows a corporation to buy the bonds at a fixed price for a fixed period of time. In other words, the corporation has a call option on the bonds. The cost of the call feature to the corporation is the cost of the option.

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

V. Risk and Return

14. Options and Corporate Finance

© The McGraw-Hill Companies, 2002

CHAPTER 14 Options and Corporate Finance

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