Which One of the Following Statements Is True

question 13

Multiple Choice

Which one of the following statements is true?

• A) Convertible corporate bonds are more secure than government bonds.
• B) Convertible bonds often pay 3 to 4 percent more interest than nonconvertible bonds.
• C) Because of the conversion feature, it is not necessary to evaluate convertible, corporate bonds.
• D) There is no guarantee that bondholders will convert to common stock even if the market value of the common stock does increase in value.
• E) Even if convertible bondholders convert their investment to common stock, the bondholders still receive interest payments.

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Definitions:

Risk-Free Rate

The rate of return on an investment with no risk of financial loss, often represented by the yield on government securities.

Evolution of Beta

The changes in Beta over time, reflecting how a security's volatility relative to the market can vary with different market conditions or company developments.

Forecast

Prediction or estimation of future events or trends, especially regarding economics or weather.

Forecasted Market Return

An estimation of the future returns that will be generated by the market over a specific period.