The Call Price of the Security Generally Exceeds the Security's

question 7

Multiple Choice

The call price of the security generally exceeds the security's par value by an amount equal to

• A) one year's stated interest.
• B) the straight bond value.
• C) the market value of one share of common stock.
• D) the market premium.

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Definitions:

Exercise Option

An option in derivatives trading that allows the holder to buy or sell an asset at a predetermined price before or on a specific date.

Convertible

A type of financial security that can be changed into a different form, most commonly a bond that can be converted into shares of the issuing company.

Promised Yield

The return an investor is told to expect from a bond or other fixed-income security, assuming it is held to maturity and all payments are made as scheduled.

Bond A

A financial security that represents a loan made by an investor to a borrower, typically corporate or governmental, which pays interest at predetermined intervals.