Which of the following is True? a) Equity can be interpreted as a call option on the company’s debt

Business Dec 09, 2021

Which of the following is True? a) Equity can be interpreted as a call option on the company’s debt. b) Risky debt is a long position on a put option held by debtholders along with a risk free bond. c) Both convertible and callable bonds are cheaper for the issuer in terms of interest paid relative to a straight bond. d) The willingness of debtholders to accept a loss on the bonds they hold may help relieve the debt overhang problem.