Examlex

Solved

When Convertible Bonds Are First Issued

question 11

Multiple Choice

When convertible bonds are first issued
I. the conversion price of the share is higher than the market price.
II. the market price of the share is higher than the conversion price.
III. the coupon rate is higher than if the bond were not convertible.
IV. the coupon rate is lower than if the bond were not convertible.


Definitions:

Liability Account

A liability account is a financial reporting account that is used to record obligations or debts that a company owes to others, such as loans, accounts payable, or mortgages.

Noninterest-Bearing Notes

These are promissory notes issued at a discount to face value that do not pay periodic interest, with the return to the investor being the difference between the purchase price and the face value at maturity.

Discounted Note

A promissory note whose face value has been reduced to reflect the effect of interest that it will earn.

Related Questions