Which One of the Following Statements Related to Convertible Bonds

question 13

Multiple Choice

Which one of the following statements related to convertible bonds is correct?

• A)Bondholders forego higher coupon rates in exchange for the conversion option.
• B)Convertible bonds are generally issued such that the conversion value is equal to the par value.
• C)The conversion price is equal to the bond's market value divided by the conversion ratio.
• D)The conversion value is equal to the bond's market price multiplied by the conversion ratio.
• E)Bonds should be converted as soon as the conversion value exceeds the face value.

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Definitions:

Unsecured Open-End Credit

A line of credit that does not require collateral and can be used repeatedly up to a certain limit.

Annual Percentage Rate

The annual rate charged for borrowing or earned through an investment, expressed as a percentage that represents the actual yearly cost of funds over the term of a loan or income from an investment.

Newspaper Advertisement

A public announcement or promotion of products, services, or events published in a newspaper.

Savings And Loan Association

A financial institution that specializes in accepting savings deposits and making mortgage and other loans.