Concerning Convertible Bonds, Which of the Following Statements Is Not

question 53

Multiple Choice

Concerning convertible bonds, which of the following statements is not correct?

• A)A convertible bond issue would generally have fewer restrictive covenants than an otherwise identical nonconvertible bond.
• B)Convertible bonds can be issued at a lower coupon compared with otherwise non-convertible bonds.
• C)If the value of a convertible bond exceeds the maximum of its straight bond value or its conversion value, the difference would be referred to as the option value.
• D)Since convertible bonds will be exchanged for common stock, convertible bonds are generally not callable.
• E)More than one of the above is incorrect.

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Definitions:

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Temporal Precedence

A principle in establishing causation indicating that the cause must occur before the effect.

Covariation

The measure of how much two variables change together, indicating the extent to which they are associated.

Alternative Explanations

Entails considering different reasons or theories that could explain observed data or phenomena, beyond the primary hypothesis.