Question #40
Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options
PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options.pdf
Page: 10
Status: Correct
Correct Answer: A
Question
For a convertible bond without any other options, the call feature implied by the convertibility feature will do all of the following EXCEPT:
Answer Choices:
A. increase the value of the bond over that of a comparable option-free bond
B. cause negative convexity
C. place a lower limit on the possible values of the bond. George Nagy is a fixed income manager with Luna Securities. Nagy is analyzing several securities issued by Redna, Inc. First, he is looking at a three-year, annual-pay floating rate note with an embedded cap of 6.5% paying coupons in arrears
No explanation available for this question.