Which of the Following Statements About Convertible Bonds Is/are True

question 22

Multiple Choice

Which of the following statements about convertible bonds is/are true?

• A)conversion of bonds into stock is at the issuing firm's option
• B)convertible bonds usually have a higher interest rate than nonconvertible bonds
• C)the bonds will be converted only if the value of the stock is greater than the value of the bonds
• D)all of the above are true

---

Definitions:

Rational Expectations

The hypothesis that individuals form predictions of the future based on available information and act on those predictions rationally.

Consumption Goods

Goods that are purchased by consumers for the purpose of consumption and not for resale.

Capital Goods

Physical assets such as buildings, machinery, and equipment used by businesses to produce goods and services.

Competitive Economy

An economic system in which businesses and individuals freely compete for consumers' money with minimal government intervention, leading to innovation and efficient market outcomes.