Which Set of Circumstances Would Best Ensure the Price of a Bond

question 5

Multiple Choice

Which set of circumstances would best ensure the price of a bond with attached warrants will increase given no change in the bond's credit quality or terms?

• A)An increase in both the market rate of interest and the underlying stock price
• B)A decrease in the market rate of interest and an increase in the underlying stock price
• C)An increase in the market rate of interest and a decrease in the underlying stock price
• D)A decrease in both the market rate of interest and the underlying stock price
• E)A decrease in the market rate of interest with no change in the underlying stock price

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Definitions:

Trading Securities

Financial securities that are purchased and held primarily for sale in the near term to generate income on short-term price differences.

Unrealized Holding

A profit or loss that arises from the change in value of an investment that has not yet been sold or realized.

Trading Securities

Financial instruments such as stocks and bonds that are bought and sold for the purpose of generating profits on short-term fluctuations in their prices.