Which of the Following Statements About Bonds That Are Both

question 23

Multiple Choice

Which of the following statements about bonds that are both convertible and callable is NOT true?

• A)The decision to be made by the bondholder when the bonds are called is the same as she would have to make at maturity.
• B)Prior to maturity, the value of such a bond will be greater than the shares that bond can be converted into.
• C)The issuer can force bondholders to decide whether or not to convert at a time of the issuer's choosing.
• D)If these bonds are called by the issuer, the holder can choose to convert them rather than let them be called.

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Definitions:

Average Costs

The total costs (fixed and variable) divided by the total output, indicating the cost per unit of output produced.

Decreasing Returns to Scale

A situation in which, when the scale of production is increased, the output increases at a proportionally lower rate.

Minimum Efficient Scale

The smallest level of production a company can achieve while still taking full advantage of economies of scale in terms of costs per unit.

Long-Run Average Cost Curve

A graphical representation showing the lowest average cost of producing any output level when all inputs can be varied.