Which One of the Following Statements About Convertibles Is False

question 31

Multiple Choice

Which one of the following statements about convertibles is false?

• A) The longer the call protection on a convertible,the less the security is worth.
• B) The more volatile the underlying stock,the greater the value of the conversion feature.
• C) The smaller the spread between the dividend yield on the stock and the yield-to-maturity on the bond,the more the convertible is worth.
• D) The collateral that is used to secure a convertible bond is one reason convertibles are more attractive than the underlying stock.
• E) The longer the call protection on a convertible,the less the security is worth,the smaller the spread between the dividend yield on the stock and the yield-to-maturity on the bond,the more the convertible is worth and the collateral that is used to secure a convertible bond is one reason convertibles are more attractive than the underlying stock.

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Definitions:

Cumulative Translation Gains/Losses

The aggregate change in the value of a foreign entity's equity due to differences in exchange rates over time, recognized in the accumulated other comprehensive income section of equity.

British Pound Sterling

The official currency of the United Kingdom, which is one of the world's major currencies traded on foreign exchange markets.

Financial Statements

Reports that provide an overview of a company's financial condition, including the balance sheet, income statement, and cash flow statement, among others.

Foreign Currency Transactions

Financial operations involving the exchange of one country's currency for another, affecting businesses that trade or invest across borders.