Which One of the Following Statements Related to Convertible Bonds

question 72

Multiple Choice

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

• A)Convertible bonds have a maximum value equal to the bond's intrinsic value.
• B)Convertible bonds have limited downside risk with unlimited upside potential.
• C)A convertible bond is in the money when its call price is greater than its conversion value.
• D)Convertible bonds must be converted prior to or on the maturity date.
• E)Convertible bonds must be converted once they are called.

---

Definitions:

Accommodation Party

A person who signs a negotiable instrument on behalf of another, typically to lend their credit without direct benefit.

Negotiable Instrument

A financial document that guarantees payment of a specified amount of money, either on-demand or at a set time, and is transferable from one person to another.

Holder In Due Course

A legal term describing a party who has acquired a negotiable instrument in good faith and for value, and thus has certain protections against defects.

Negotiates

The act of discussing something formally to reach an agreement or compromise on terms.