menu
Sign up

If the Share Price Rises Substantially Above the Conversion Price

Question 17
Multiple Choice

If the share price rises substantially above the conversion price, an advantage to the corporation would be: A) the premium would decrease. B) the floor price would offer the investor downside protection. C) the bond would most likely be converted into common shares and the debt would not have to be repaid. D) the firm could raise the capital needed by issuing fewer shares than those sold from the conversion of the securities.

Related questions
Q 18
A step-up in the conversion price refers to: A) the ability of the company to step up the maturity of the bond to an earlier date. B) the provision that decreases the conversion ratio the longer a convertible bond is held. C) a refunding of a convertible bond when the conversion value equals the pure bond value. D) the ability of the holder to step up the conversion maturity to an earlier date.
Q 19
The conversion premium is the greatest and the downside the smallest when: A) the conversion value equals the pure bond value. B) the conversion value is greater than the pure bond value. C) the conversion value is less than the pure bond value. D) the share price is expected to go up drastically.
Q 20
A disadvantage to the investor of a convertible bond is that: A) the share price may rise above conversion price. B) if interest rates rise, the pure bond value (floor price) will decline. C) the interest rate on convertibles is generally one-half below the coupon rate on straight bonds of similar risk. D) interest paid on convertible bonds is higher than that paid on non-convertible bonds.
logo
© 2020 QuizPlus. All Right Reserved