Which One of the Following Statements About Convertibles Is True

question 93

Multiple Choice

Which one of the following statements about convertibles is true?

• A)The longer the call protection on a convertible, the less the security is worth.
• B)The more volatile the underlying stock, the greater the value of the conversion feature.
• C)The smaller the spread between the dividend yield on the stock and the yield-to-maturity on the bond, the more the convertible is worth.
• D)The collateral that is used to secure a convertible bond is one reason convertibles are more attractive than the underlying stock.

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Definitions:

Fixed-Rate Mortgage

A home loan with an interest rate that remains the same for the entire term of the loan, providing predictable monthly payments.

Interest Rate

The amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets.

Mortgagor

The borrower in a mortgage agreement, who pledges property to the lender as security for the loan.

Fixed Rate

An interest rate that remains constant over the duration of the loan, bond, mortgage, or any financial product.