Question #51

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: 14

Status: Unattempted

Part of Context Group: Q51-52 First in Group
Shared Context
- Assuming the common stock of MediSoft underwent a one-for-two reverse split, how would the features of the company's bonds be adjusted? The: A) conversion value of the convertible bond would be reduced by half. B) market conversion price of the convertible bond would be reduced by half. C) conversion ratio of the convertible bond would be reduced by 50%.
Question
Under what circumstances will the analyst's comments regarding the limited downside risk of MediSoft's convertible bonds be accurate?
Answer Choices:
A. The convertible bond is trading in the market as a common stock equivalent
B. Short-term and long-term interest rates are expected to remain the same
C. The Federal Reserve Bank decides to pursue a restrictive monetary policy
No explanation available for this question.
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