Which of the Following Is the Most Sensible Reason for Issuing

question 48

Multiple Choice

Which of the following is the most sensible reason for issuing convertibles?

• A)Convertibles are convenient and flexible-they're usually unsecured and subordinated, and cash requirements for debt service are relatively low.
• B)Interest rates on convertible issues are significantly less than on straight debt.
• C)Firms that need equity capital use convertibles as a roundabout way of issuing stock.
• D)Firms prefer to issue convertibles when their shares are undervalued.

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Definitions:

Charles Darwin

A British naturalist renowned for his theory of evolution and the process of natural selection.

Leon Festinger

A psychologist known for his theory of cognitive dissonance, which suggests that people experience discomfort when they hold contradictory beliefs, leading them to change their attitudes or behaviors.

Robert Zajonc

A psychologist known for his work on social facilitation, the mere exposure effect, and the interplay between affective and cognitive processes.

Ivan Pavlov

A Russian physiologist known for his work in classical conditioning, particularly his experiments with dogs, salivation, and the association of stimuli.