All of the Following Statements Regarding Convertible Bonds Are True

question 164

Multiple Choice

All of the following statements regarding convertible bonds are true except

• A) if the market price of common stock increases substantially, bondholders with convertible bonds benefit.
• B) convertible bonds can be converted into common stock at the option of the issuing company.
• C) bondholders with convertible bonds receive interest on the bonds until conversion.
• D) convertible bonds sell at a higher price and pay a low rate of interest than those without the conversion option.

Calculate and report unrealized gains and losses on investments.

Account for dividends received from investments.

Understand the impact of fair value adjustments on the financial statements.

Identify and apply the equity method of accounting for investments that provide significant influence but not control.

---

Definitions:

Employee Leasing

The practice of hiring workers through a third-party organization which handles various HR tasks such as payroll and benefits administration.

WARN Act

The Worker Adjustment and Retraining Notification Act that requires employers to provide notice in advance of certain plant closings and mass layoffs.

Employee Leasing

A staffing arrangement where a leasing firm hires and manages employees, then contracts them out to work for another company, effectively outsourcing the HR functions.

Voluntary Early Retirement

A program offered by employers allowing employees to retire earlier than the traditional retirement age, often with full or partial benefits.