Which of the Following Is Most Likely to Happen with a Convertible

question 3

Multiple Choice

Which of the following is most likely to happen with a convertible bond when the market price of the share exceeds the conversion price. The share does not pay a dividend.

• A) The issuing company will call the bonds and bondholders will convert them to ordinary shares.
• B) Both the issuing company and the bondholders will wait for the bonds to reach their maturity date.
• C) The issuing company will call the bonds and the bondholders will redeem them for the call price.
• D) The bondholders will immediately convert their bonds to share.

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Definitions:

Mode

Mode refers to the most frequently occurring value in a set of data.

Regression Toward the Mean

A statistical phenomenon wherein extreme scores on one occasion tend to be closer to the average on subsequent testing.

Illusory Correlation

A cognitive bias where people falsely perceive an association between two unrelated events or variables.

Random Assignment

A procedure in experimental designs that ensures each participant has an equal chance of being placed into any group, reducing biases.