If Bonds Can Be Converted into Common Stock

question 150

Multiple Choice

If bonds can be converted into common stock

• A) they will sell at a lower price than comparable bonds without a conversion feature.
• B) they will carry a higher interest rate than comparable bonds without the conversion feature.
• C) they will be converted only if the issuer calls them in for conversion.
• D) the bondholder may benefit if the market price of the common stock increases substantially.

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