Which of the Following Bonds Carry Significant Risk That the Issuer

question 39

Multiple Choice

Which of the following bonds carry significant risk that the issuer will not make current or future payments?

• A) Credit quality risk bonds
• B) Interest rate risk bonds
• C) Liquidity rate risk bonds
• D) Junk bonds

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Definitions:

Convertible Bonds

Convertible bonds are a type of bond that can be converted into a predetermined number of the company's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.

Conversion Premium

The extra amount over the current value of the underlying asset that convertible security holders pay when converting into common stock.

Convertible Bond

A type of bond that can be converted into a predetermined number of shares of the issuing company's stock, at certain times during its life, usually at the discretion of the bondholder.

Conversion Price

The predetermined price at which convertible securities can be exchanged for a specified number of shares.