Which of the Following Is Most Likely to Happen with a Convertible

question 82

Multiple Choice

Which of the following is most likely to happen with a convertible bond when the market price of the stock exceeds the conversion price? The stock does not pay a dividend.

• A) The bondholders will immediately convert their bonds to stock.
• B) The issuing company will call the bonds and the bondholders will redeem them for the call price.
• C) The issuing company will call the bonds and bondholders will convert them to common shares.
• D) Both the issuing company and the bondholders will wait for the bonds to reach their maturity date.

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Definitions:

Theocratic

Pertaining to a form of government or a society where religious leaders control political power, often based on the belief that their authority is divinely guided.

Anarchic

Characterized by a state of disorder and absence of governmental authority or a structured society.

Extremism

Holding extreme political or religious views.

Socialism

An economic and political system where the means of production are owned and controlled by the state or public, aiming for equal distribution of wealth and resources.