Question #52

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
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
Subsequent to purchasing one of the putable bonds for his portfolio, one of the managers at Brown & Associates realized that the bond contained a soft put. Which of the following securities cannot be used to redeem the bond in the event the bond becomes putable?
Answer Choices:
A. Thirty-year Treasury notes with a coupon of 4.5%
B. MediSoft’s 9.0% subordinated notes with a maturity of 10 years
C. Shares of MediSoft’s common stock
No explanation available for this question.
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