Which of the Following Statements Is FALSE

question 4

Multiple Choice

Which of the following statements is FALSE?

• A) If the stock price is low so that the embedded warrant is deep out-of-the-money, the conversion provision is not worth much and the bond's value is close to the value of a straight
• Bond- an otherwise identical bond without the conversion provision.
• B) Calling a convertible bond transfers the remaining time value of the conversion option from shareholders to bondholders.
• C) A convertible bond can be thought of as a regular bond plus a special type of call option called a warrant.
• D) On the maturity date of the bond, the strike price of the embedded warrant in a convertible bond is equal to the face value of the bond divided by the conversion ratio- that is, the conversion price.

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