Concerning Convertible Bonds,which of the Following Statements Is Not Correct

question 8

Multiple Choice

Concerning convertible bonds,which of the following statements is not correct?

• A)A convertible bond issue would generally have fewer restrictive covenants than an otherwise identical nonconvertible bond.
• B)Convertible bonds can be issued at a lower coupon compared with otherwise non-convertible bonds.
• C)If the value of a convertible bond exceeds the maximum of its straight bond value or its conversion value,the difference would be referred to as the option value.
• D)Since convertible bonds will be exchanged for ordinary equity,convertible bonds are generally not callable.
• E)More than one of the above is incorrect.

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Definitions:

Fair Value

The price one would receive for offloading an asset or would pay to reassign a liability during a formal transaction with participants in the market at the time of valuation.

Consolidated Balance

Refers to the presentation of assets, liabilities, and equity in a single balance sheet that combines the financials of a parent company with its subsidiaries.