 | Chapter Concepts
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- Convertible securities can be converted to common stock at the option of the owner.
- Because these securities can be converted to common stock, they may move with the value of common stock.
- Interest rates on convertibles are lower than those on straight debt issues.
- Warrants are similar to convertibles in that they give the warrant holder the right to acquire common stock.
- Accountants require that the potential effect of convertibles and warrants on earnings per share be reported on the income statement.
- Derivative securities such as options and futures can be used by corporate financial managers for hedging activities.
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