You work for Titan Boats who will issue $10 million of bonds. Titan Boats can...
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Finance
You work for Titan Boats who will issue $10 million of bonds. Titan Boats can issue one of four different types of bonds. Thus, your supervisor has asked you to evaluate all four and to recommend the best one. The four types of bonds differ as follows:
(a) Bond A has a conversion feature, but no call feature.
(b) Bond B has a call feature, but no conversion feature.
(c) Bond C has both a conversion feature and a call feature.
(d) Bond D has neither a conversion feature nor a call feature.
All four types of bonds will have the same issue price (100% of par value), same maturity date (12/31/2030), same coupon rate (6.00%), and same bond rating (AA). Thus, Titan Boats receives the same amount of money whether they issue Bond A, B, C, or D.
Which ONE bond would you recommend to your supervisor or are you indifferent between the bonds? Explain your answer.
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