Which of the Following Characteristics Are Drawbacks of Convertible Bonds

question 102

Multiple Choice

Which of the following characteristics are drawbacks of convertible bonds?

• A) Downside protection is effectual if the bond is bought at a large premium over par value.
• B) Interest rates on a convertible bond are always above market interest rates.
• C) Conversion may be forced on the bondholder by put provisions on the convertible bond.
• D) Interest rates on the debt-instrument part of a convertible bond are frequently below market interest rates.

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Definitions:

Seasonal Funding

Temporary financing used to cover seasonal increases in business expenses or inventory needs.

Cash Flows

The combined total of cash inflows and outflows in a business, essentially affecting its capacity to meet short-term obligations.

Seasonal Sales

Sales fluctuations that occur at certain times of the year, often due to changes in weather, holidays, or other seasonal factors.

Cash Disbursements

The outflow of cash to pay expenses, purchase assets, or repay debts.