Question 1

Convertible bond prices rise when interest rates increase.​

Accepted Answer

A) True 
 B)False

Question 2

​If a bond lacks a conversion feature,
​1)  the bond would have a lower coupon
2)  the bond would have a higher coupon
3)  the price of the bond would be more responsive to changes in interest rates
4)  the price of the bond would be less responsive to changes in interest rates

Accepted Answer

A)  ​1 and 3
B)  ​1 and 4
C)  ​2 and 3
D)  ​2 and 4 C

Question 3

As interest rates increase, the probability that a convertible bond will be called declines.​

Accepted Answer

A) True 
 B)False

Question 4

Convertible preferred stock is convertible into the company's debentures.​

Accepted Answer

A) True 
 B)False

Question 5

​Convertible bonds tend to sell for a premium over their value as stock.

Accepted Answer

A) True 
 B)False

Question 6

When a convertible bond is called, the bondholder must convert the bond or lose the appreciation achieved by the stock.​

Accepted Answer

A) True 
 B)False  True

Question 7

Convertible bonds tend to pay more interest than comparable non‑convertible bonds.​

Accepted Answer

A) True 
 B)False

Question 8

​The value of convertible preferred stock as common stock depends on
1)  the exercise terms
2)  the dividend paid by the preferred
3)  the price of the common stock

Accepted Answer

A)  ​1 and 2
B)  ​1 and 3
C)  ​2 and 3
D)  ​1, 2, and 3

Question 9

​Which of the following bonds is supported by collateral?​

Accepted Answer

A)   ​convertible bonds
B)   ​income bonds
C)   ​equipment trust certificates
D)   ​debentures

Question 10

The value of a convertible bond as stock depends in part upon

Accepted Answer

A)   ​interest rates
B)   ​the maturity date
C)   ​the exercise price
D)   ​the call penalty

Question 11

If a convertible bond is not called nor converted, the firm must ultimately retire it.​

Accepted Answer

A) True 
 B)False

Question 12

​Convertible bonds have a call feature to

Accepted Answer

A)   ​protect stockholders from early conversions
B)   ​protect bondholders from conversions by stockholders
C)   ​force stockholders to convert
D)   ​force bondholders to convert

Question 13

As the price of the stock rises, the probability that a convertible bond will be called increases.​

Accepted Answer

A) True 
 B)False

Question 14

A convertible bond may be converted at the firm's option into common stock.​

Accepted Answer

A) True 
 B)False

Question 15

Convertible bonds have​
1)  an indenture
2)  perpetual life
3)  a specified conversion price

Accepted Answer

A)  ​​1 and 2
B)  ​1 and 3
C)  ​2 and 3
D)  ​1, 2, and 3

Question 16

​The value of a convertible bond as debt depends on

Accepted Answer

A)   ​the exercise price
B)   ​the call penalty
C)   ​the interest rate
D)   ​the price of the stock

Question 17

The value of a convertible bond as stock depends in part on the bond's coupon.​

Accepted Answer

A) True 
 B)False

Question 18

Convertible bonds tend to pay less interest than comparable non‑convertible bonds.​

Accepted Answer

A) True 
 B)False  True

Question 19

​Convertible preferred stock
1)  pays a fixed dividend
2)  may be converted into the firm's common stock
3)  is equity

Accepted Answer

A)  ​1 and 2
B)  ​1 and 3
C)  ​2 and 3
D)  ​1, 2, and 3

Question 20

​The value of a convertible bond as debt depends on a maturity date
1)  current interest rates
2)  the coupon rate of interest
3)  the dividends paid by the common stock

Accepted Answer

A)  1 and 2
B)  1 and 3
C)  ​2 and 3
D)  ​1, 2, and 3

Exam 15: Convertile Securities

Convertible bond prices rise when interest rates increase.​

Correct AnswerverifiedShow Answer

​If a bond lacks a conversion feature, ​1) the bond would have a lower coupon 2) the bond would have a higher coupon 3) the price of the bond would be more responsive to changes in interest rates 4) the price of the bond would be less responsive to changes in interest rates

Correct AnswerverifiedC

As interest rates increase, the probability that a convertible bond will be called declines.​

Correct AnswerverifiedShow Answer

Convertible preferred stock is convertible into the company's debentures.​

Correct AnswerverifiedShow Answer

​Convertible bonds tend to sell for a premium over their value as stock.

Correct AnswerverifiedShow Answer

When a convertible bond is called, the bondholder must convert the bond or lose the appreciation achieved by the stock.​

Correct AnswerverifiedTrue

Convertible bonds tend to pay more interest than comparable non‑convertible bonds.​

Correct AnswerverifiedShow Answer

​The value of convertible preferred stock as common stock depends on 1) the exercise terms 2) the dividend paid by the preferred 3) the price of the common stock

Correct AnswerverifiedShow Answer

​Which of the following bonds is supported by collateral?​

Correct AnswerverifiedShow Answer

The value of a convertible bond as stock depends in part upon

Correct AnswerverifiedShow Answer

If a convertible bond is not called nor converted, the firm must ultimately retire it.​

Correct AnswerverifiedShow Answer

​Convertible bonds have a call feature to

Correct AnswerverifiedShow Answer

As the price of the stock rises, the probability that a convertible bond will be called increases.​

Correct AnswerverifiedShow Answer

A convertible bond may be converted at the firm's option into common stock.​

Correct AnswerverifiedShow Answer

Convertible bonds have​ 1) an indenture 2) perpetual life 3) a specified conversion price

Correct AnswerverifiedShow Answer

​The value of a convertible bond as debt depends on

Correct AnswerverifiedShow Answer

The value of a convertible bond as stock depends in part on the bond's coupon.​

Correct AnswerverifiedShow Answer

Convertible bonds tend to pay less interest than comparable non‑convertible bonds.​

Correct AnswerverifiedTrue

​Convertible preferred stock 1) pays a fixed dividend 2) may be converted into the firm's common stock 3) is equity

Correct AnswerverifiedShow Answer

​The value of a convertible bond as debt depends on a maturity date 1) current interest rates 2) the coupon rate of interest 3) the dividends paid by the common stock

Correct AnswerverifiedShow Answer

Convertible bond prices rise when interest rates increase.

Correct Answer
verified

If a bond lacks a conversion feature, 1) the bond would have a lower coupon 2) the bond would have a higher coupon 3) the price of the bond would be more responsive to changes in interest rates 4) the price of the bond would be less responsive to changes in interest rates

Correct Answer
verified
C

As interest rates increase, the probability that a convertible bond will be called declines.

Correct Answer
verified

Convertible preferred stock is convertible into the company's debentures.

Correct Answer
verified

Convertible bonds tend to sell for a premium over their value as stock.

Correct Answer
verified

When a convertible bond is called, the bondholder must convert the bond or lose the appreciation achieved by the stock.

Correct Answer
verified
True

Convertible bonds tend to pay more interest than comparable non‑convertible bonds.

Correct Answer
verified

The value of convertible preferred stock as common stock depends on 1) the exercise terms 2) the dividend paid by the preferred 3) the price of the common stock

Correct Answer
verified

Which of the following bonds is supported by collateral?

Correct Answer
verified

Correct Answer
verified

If a convertible bond is not called nor converted, the firm must ultimately retire it.

Correct Answer
verified

Convertible bonds have a call feature to

Correct Answer
verified

As the price of the stock rises, the probability that a convertible bond will be called increases.

Correct Answer
verified

A convertible bond may be converted at the firm's option into common stock.

Correct Answer
verified

Convertible bonds have 1) an indenture 2) perpetual life 3) a specified conversion price

Correct Answer
verified

The value of a convertible bond as debt depends on

Correct Answer
verified

The value of a convertible bond as stock depends in part on the bond's coupon.

Correct Answer
verified

Convertible bonds tend to pay less interest than comparable non‑convertible bonds.

Correct Answer
verified
True

Convertible preferred stock 1) pays a fixed dividend 2) may be converted into the firm's common stock 3) is equity

Correct Answer
verified

The value of a convertible bond as debt depends on a maturity date 1) current interest rates 2) the coupon rate of interest 3) the dividends paid by the common stock

Correct Answer
verified