A Company Is Advised to Issue Convertible Notes

question 36

Multiple Choice

A company is advised to issue convertible notes.They are advised of the conditions applicable to the convertible note issue.Which of the following conditions is incorrect?

• A) The holder of the note has the right to convert the note into preference shares.
• B) Notes are generally available on a pro-rata entitlement to shareholders.
• C) Entitlements to convertible notes are generally not renounceable.
• D) Notes are usually issued at a price close to the current share price at the time of issue.

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Definitions:

Certificates of Deposit

Fixed-term financial instruments issued by banks that pay interest until maturity, when they can be redeemed for the original amount plus accrued interest.

Petty Cash

A small amount of cash on hand used for covering minor expenses in a business.

Current Asset

A current asset is an asset that is expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is longer.

Bank Checking Account

A bank account that allows the holder to deposit and withdraw money and write checks.