A Firm May Prefer to Issue a Convertible Bond, as Opposed

question 90

Multiple Choice

A firm may prefer to issue a convertible bond, as opposed to issuing equity, because

• A)a convertible issue sends a better signal to investors than an issue of common stock.
• B)a convertible issue shows the management's willingness to take a chance that the stock price will rise enough to lead to conversion and also signals management's confidence in the future.
• C)a convertible issue sends a better signal to investors than an issue of common stock, and an announcement of a stock issue generates worries of overvaluation and usually depresses the stock price.
• D)a convertible issue sends a better signal to investors than an issue of common stock, an announcement of a stock issue generates worries of overvaluation and usually depresses the stock price, and a convertible issue shows the management's willingness to take a chance that the stock price will rise enough to lead to conversion and also signals management's confidence in the future.

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Definitions:

Psychoactive Drugs

Substances that alter brain function, resulting in temporary changes in perception, mood, consciousness, and behavior.

Sleep

A naturally recurring state of mind and body characterized by altered consciousness, relatively inhibited sensory activity, reduced muscle activity, and inhibition of nearly all voluntary muscles during rapid eye movement (REM) sleep.

Appetite

The natural desire to satisfy bodily needs for food, influenced by psychological, physiological, and environmental factors.

Self-Confidence

One's belief in their own abilities or judgment, enabling them to face new challenges or undertake tasks.