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Issuing Convertible Bond Is Better Than Issuing Equity by a Firm

question 52

Multiple Choice

Issuing convertible bond is better than issuing equity by a firm because:
I. a convertible issue sends a better signal to investors than an issue of common stock.
II. an announcement of a stock issue generates worries of overvaluation and usually depresses stock price.
III. a convertible issue shows the management's willingness to take chance that the stock price will rise enough to lead to conversion also signals management's confidence in the future.


Definitions:

Confidence Interval

A range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter, with a given level of confidence.

Ethanol

A volatile, flammable, colorless liquid commonly used as a fuel and in chemical synthesis, and also found in alcoholic beverages.

Disinfectant

A chemical agent used to eliminate or significantly reduce the presence of pathogenic microorganisms on surfaces or objects.

Bacterial Contamination

Bacterial contamination refers to the undesirable presence of bacteria in a substance, environment, or object, which can pose health risks.

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