4. Convertible bonds: a. Allow the security holder to convert the bond into cash at any time during the life of the bond. b. Allow the security holder to convert the bond into products or services that the company sells. c. Allow the security holder to convert the bond to another security, usually equity, according to some pre- specified terms. d. Allow the security holder to convert the bond into another bond with a higher coupon rate if interest rates on bonds increase before the convertible bond matures. e. None of the above. 5. The same firm issues two different bonds. The bonds are identical in every respect except for their time to maturity. Bond A matures in 7 years and Bond B matures in 5 years. Which bond has a higher price? a. Bond A b. Bond B c. Both have the same value. d. One must know YTM and coupon rate to answer the question. e. One must know the compounding frequency to answer the question. 6. When the yield to maturity (YTM) for a particular bond is greater than its coupon rate, the bond is selling at: a. A premium. b. A discount. c. Par value d. The bond’s current yield. e. The correct answer to this question cannot be determined without more information
4. Convertible bonds: a. Allow the security holder to convert the bond into cash at any time during the life of the bond. b. Allow the security holder to convert the bond into products or services that the company sells. c. Allow the security holder to convert the bond to another security, usually equity, according to some pre- specified terms. d. Allow the security holder to convert the bond into another bond with a higher coupon rate if interest rates on bonds increase before the convertible bond matures. e. None of the above. 5. The same firm issues two different bonds. The bonds are identical in every respect except for their time to maturity. Bond A matures in 7 years and Bond B matures in 5 years. Which bond has a higher price? a. Bond A b. Bond B c. Both have the same value. d. One must know YTM and coupon rate to answer the question. e. One must know the compounding frequency to answer the question. 6. When the yield to maturity (YTM) for a particular bond is greater than its coupon rate, the bond is selling at: a. A premium. b. A discount. c. Par value d. The bond’s current yield. e. The correct answer to this question cannot be determined without more information
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 2MC: A debenture is ________. A. the interest paid on a bond B. a type of bond that can be sold back to...
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4. Convertible bonds:
a. Allow the security holder to convert the bond into cash at any time during the life of the bond.
b. Allow the security holder to convert the bond into products or services that the company sells.
c. Allow the security holder to convert the bond to another security, usually equity, according to some pre-
specified terms.
d. Allow the security holder to convert the bond into another bond with a higher coupon rate if interest rates
on bonds increase before the convertible bond matures.
e. None of the above.
5. The same firm issues two different bonds. The bonds are identical in every respect except for their time to
maturity. Bond A matures in 7 years and Bond B matures in 5 years. Which bond has a higher price?
a. Bond A
b. Bond B
c. Both have the same value.
d. One must know YTM and coupon rate to answer the question.
e. One must know the compounding frequency to answer the question.
a. Allow the security holder to convert the bond into cash at any time during the life of the bond.
b. Allow the security holder to convert the bond into products or services that the company sells.
c. Allow the security holder to convert the bond to another security, usually equity, according to some pre-
specified terms.
d. Allow the security holder to convert the bond into another bond with a higher coupon rate if interest rates
on bonds increase before the convertible bond matures.
e. None of the above.
5. The same firm issues two different bonds. The bonds are identical in every respect except for their time to
maturity. Bond A matures in 7 years and Bond B matures in 5 years. Which bond has a higher price?
a. Bond A
b. Bond B
c. Both have the same value.
d. One must know YTM and coupon rate to answer the question.
e. One must know the compounding frequency to answer the question.
6. When the yield to maturity (YTM) for a particular bond is greater than its coupon rate, the bond is selling at:
a. A premium.
b. A discount.
c. Par value
d. The bond’s current yield.
e. The correct answer to this question cannot be determined without more information
a. A premium.
b. A discount.
c. Par value
d. The bond’s current yield.
e. The correct answer to this question cannot be determined without more information
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