Which of the Following Statements About Convertible Bonds Are True

question 54

Multiple Choice

Which of the following statements about convertible bonds are true?
I. The conversion price does not change over time.
II. The associated stocks may not pay dividends as long as the bonds are outstanding.
III. Most convertibles are also callable at the discretion of the firm.
IV. They may be thought of as straight bonds plus a call option.

• A) I and III only
• B) I and IV only
• C) I, II, and IV only
• D) III and IV only

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Definitions:

Predictive Validity

The extent to which a score on a scale or test predicts future performance or outcomes.

Dimensional Approach

A method of categorizing characteristics on a continuum rather than as binary, present-or-absent categories.

Continuum

A series where each element gradually changes without noticeable differences between neighbors, yet the starting and ending points are significantly different.

De-Stigmatizes

The process of removing or reducing negative stigma associated with a condition, behavior, or identity, promoting acceptance and understanding.