View Full Version : Question Not on Syllabus
One of the Course 2 finance questions required you to distinguish between a convertible bond and a warrant. This material was covered in Chapter 22 of Brealey & Myers, which was not part of the syllabus.
Am I the only one who noticed this? To whom do I complain?
11-09-2002, 03:21 AM
Chapter 14, page 398 of Brealey Myers has two paragraphs on convertible bonds and warrants. Pretty much just a definition, saying a warrant is nothing but an option and a convertible bond is just a bond with a warrant attached. Not very much coverage, but this is all you need to do the problem, and so I guess it is technically on the syllabus.
11-11-2002, 03:27 PM
What was the correct answer?.......warrant or convertible bond or one of the other three choices?
11-11-2002, 03:43 PM
I agree that it is questionable, but I think I got it correct.
I didn't know what a warrant or convertible bond was, but I was able to rule out the other possibilities except for Warrant and Conv. Bond, and somewhere I remember a warrant just being a put - basically I guessed - so I picked convert. bond.
Hopefully they considered this to be a - distinguish between 9 & 10 question.
Hopefully, the same thing goes for that Micro question which someone pointed out came from an advanced micro book?
11-11-2002, 03:44 PM
I mean call.
11-11-2002, 03:54 PM
well a convertible bond would seem to be correct. If the price of the stock goes way then you can convert your bonds into stock and receive a positive result. Also, if the price of stock goes down, you have a bond which gives you a positive return (i would think it would even be worth more if the price of the stock goes down, don't you want to own bonds when the stock market is down?)
These were all covered in one of the chapters in the teens in the finance text, just a concept I was hoping wouldnt' appear. I guess it's better they asked about convertible bonds rather than swaps or one of the other types of financial instruments they discussed in that chapter :D
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