Which of the Following Statements About Convertibles Is CORRECT

question 14

Multiple Choice

Which of the following statements about convertibles is CORRECT?

• A) The coupon interest rate on a firm's convertibles is generally set higher than the market yield on its otherwise similar straight debt.
• B) One advantage of convertibles over warrants is that the issuer receives additional cash money when convertibles are converted.
• C) Investors are willing to accept a lower interest rate on a convertible than on otherwise similar straight debt because convertibles are less risky than straight debt.
• D) At the time it is issued,a convertible's conversion (or exercise)price is generally set equal to or below the underlying stock's price.
• E) For equilibrium to exist,the expected return on a convertible bond must normally be between the expected return on the firm's otherwise similar straight debt and the expected return on its common stock.

---

Definitions:

Carbon Dioxide

A colorless, odorless gas produced by burning carbon and organic compounds and by respiration. It is naturally present in air and is absorbed by plants in photosynthesis.

Terrestrial Plants

Terrestrial plants are species that grow on land rather than in water, adapting to a variety of habitats from forests to deserts.

Aquifer

Rock layers that contain water and release it in appreciable quantities to wells or springs.

Rate Of Recharge

The speed at which an aquifer or a rechargeable battery regains its capacity or is refilled after use.