The Value of a Convertible Bond as Stock Depends on the

question 44

Multiple Choice

The value of a convertible bond as stock depends on the
1) current rate of interest
2) number of shares into which it is convertible

• A) 1 and 2
• B) 1 and 3
• C) 2 and 3
• D) all of these choices

---

Definitions:

Beta

A measure of a stock's volatility in relation to the overall market; a beta higher than 1 indicates greater volatility.

Risk-Free Rate

The estimated profit percentage from an investment considered free of risk, typically indicated by government bonds' interest rates.

Common Stock

A type of security that represents ownership in a corporation, entitling the holder to vote at shareholder meetings and receive dividends.

Weighted Average Cost of Capital

This refers to the overall cost of capital for a firm, weighted by each capital component's proportion in the overall capital structure.