A Convertible Bond Has a Face Value of $1000 and a Conversion

question 96

Multiple Choice

A convertible bond has a face value of $1000 and a conversion ratio of 50.This bond will sell at a premium when which of the following occurs?

• A)When market rates fall below the bond's coupon rate.
• B)When the firm's stock sells for more than $20 per share.
• C)When market rates rise above the bond's coupon rate.
• D)A and C.

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Definitions:

Festinger

Leon Festinger was a psychologist known for the theory of cognitive dissonance, which describes the discomfort felt when holding conflicting thoughts or beliefs.

Self-regulation

The process by which individuals control their own thoughts, emotions, and behaviors to pursue long-term goals.

Self-discrepancy

A psychological theory detailing the discrepancy between an individual's actual self, ideal self, and ought self.

Ought Self

An individual's representation of the attributes someone (like themselves, peers, or society) believes they should possess, often leading to motivation to meet these perceived expectations.