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Upon exercise of the conversion option for a convertible bond, all issuers must exchange shares of stock for the bond. Explain whether you agree or disagree. What is the difference between a mandatory convertible bond and a nonmandatory convertible bond? This excerpt is taken from an article titled “Cawood Looks for Convertibles,†which appeared in the January 13, 1992, issue of Bond Week, p. 7:
Cawood Christian Capital Management will invest new money in its $400 million high-yield portfolio in “busted convertibles,†double- and triple-B rated convertible bonds of companies . . ., said James Cawood, CEO. Cawood likes these convertibles as they trade at discounts and are unlikely to be called, he said.
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Order Paper Nowa. What is a busted convertible?
 b. What is the premium over straight value at which these bonds would trade?
c. Why does Mr. Cawood seek convertibles with higher investment-grade ratings?
 d. Why is Mr. Cawood interested in call protection?
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