Which of the Following Is True of Conversion Feature of a Bond

question 77

Multiple Choice

Which of the following is true of conversion feature of a bond?

• A) It adds a degree of speculation to a bond issue, although the issue still maintains its value as a bond.
• B) It decreases the marketability and liquidity of a bond since conversion feature is perceived by the market as a pessimistic approach about the firm's future.
• C) It is analogous to the put option, since it gives the bondholders the option to sell the bonds at any time till maturity.
• D) It increases the cost of debt financing.

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Definitions:

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Brooks' Law

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A shared goal or target that all members of a group or team strive to achieve.

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