Which of the Following Statements Is Most CORRECT

question 30

Multiple Choice

Which of the following statements is most CORRECT?

• A)Warrants have an option feature but convertibles do not.
• B)One important difference between warrants and convertibles is that convertibles bring in additional funds when they are converted, but exercising warrants does not bring in any additional funds.
• C)The coupon rate on convertible debt is normally set below the coupon rate that would be set on otherwise similar straight debt even though investing in convertibles is more risky than investing in straight debt.
• D)The value of a warrant to buy a safe, stable stock should exceed the value of a warrant to buy a risky, volatile stock, other things held constant.
• E)Warrants can sometimes be detached and traded separately from the security with which they were issued, but this is unusual.

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Definitions:

Goods

Objects or materials that are produced for sale or exchange in the market, generally physical and tangible in nature.

Duress

A situation where a person performs an act as a result of violence, threat, or other pressure against them.

Rescission

The revocation, cancellation, or repeal of a contract, returning the parties involved to their positions before the contract was made.

Contract of Adhesion

A standard-form contract prepared by one party to be signed by another party in a position of weaker bargaining power, often not negotiable.