When Convertible Bonds Are First Issued

question 64

Multiple Choice

When convertible bonds are first issued
I. the conversion price of the stock is higher than the market price.
II. the market price of the stock is higher than the conversion price.
III. the coupon rate is higher than if the bond were not convertible.
IV. the coupon rate is lower than if the bond were not convertible.

• A) I and III only
• B) II and IV only
• C) I and IV only
• D) II and III only

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Definitions:

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