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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Definitions:

Elite Theory

A theory in political science and sociology that suggests that societies are divided into a ruling elite and the masses, with the elite exercising significant power regardless of governmental organization.

Government Decisions

Actions or determinations made by the governing authorities of a state, affecting public policy or the administration of society.

Majoritarianism

A traditional political philosophy that emphasizes the majority's right in making decisions that affect the society or group.

Political Theory

A branch of social science that deals with the study and analysis of political ideas, behaviors, and practices.