Which of the Following Statements Is FALSE

question 9

Multiple Choice

Which of the following statements is FALSE?

• A)Calling a convertible bond transfers the remaining time value of the conversion option from shareholders to bondholders.
• B)If the stock price is low so that the embedded warrant is deep out-of-the-money, the conversion provision is not worth much and the bond's value is close to the value of a straight bond- an otherwise identical bond without the conversion provision.
• C)On the maturity date of the bond, the strike price of the embedded warrant in a convertible bond is equal to the face value of the bond divided by the conversion ratio- that is, the conversion price.
• D)A convertible bond can be thought of as a regular bond plus a special type of call option called a warrant.

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Definitions:

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A graphical representation showing the maximum combinations of goods or services an economy can produce given its resources and technology.

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The cost of foregoing the next best alternative when making a decision.

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A type of edible fruit that is elongated and curved, with soft flesh rich in starch covered by a rind, which may be green, yellow, or brown when ripe.