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:

Midline

An imaginary line that divides the body into equal left and right halves.

Lateral

Pertaining to the side, often used to describe relative position or direction in anatomy and medicine.

Medial

Situated toward the midline of the body or an organ.

Cartilage Degeneration

The breakdown or loss of the smooth cartilage tissue that covers the ends of bones in joints, leading to conditions such as osteoarthritis.