The Conversion Feature of a Bond Permits A

question 11

Multiple Choice

The conversion feature of a bond permits a:

• A)company to convert a high coupon rate bond into a lower coupon rate bond.
• B)bondholder to exchange his or her bonds for the company's common stock.
• C)bondholder to redeem a small percentage of the bond every year.
• D)company to convert the face value of the bond to the market price of the bond.
• E)company to trade outstanding bonds with a term deposit in a financial institution.

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Definitions:

Saving

The portion of income not spent on consumption or taxes, typically put aside for future use or investment.

APC

The acronym for Average Propensity to Consume, which measures the fraction of income that households spend on goods and services rather than saving.

Disposable Income

The cash pile households can utilize for their spending and savings needs after income taxes are handled.

MPC

Marginal Propensity to Consume, which represents the ratio of change in consumer spending to a change in household income.