Homework Help is Here – Start Your Trial Now!
Business
Finance
Problem 7-20 Multiple choice (IAA) 1. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrumente

Problem 7-20 Multiple choice (IAA) 1. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrumente

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
See similar textbooks
icon
Related questions
Question
Problem 7-20 Multiple choice (IAA) 1. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrument 2. Convertible bonds a. Have priority over other indebtedness. b. Are usually secured by a mortgage. c. Pay interest only in the event net income is sufficient to cover the interest. d. May be exchanged for equity shares. 3. What is the main reason for issuing convertible bond? a. The ease with which convertible bond is sold even if the entity has a poor credit rating. b. The fact that share capital has issue cost and convertible bond has none. c. Entities can obtain financing at lower rate. d. Convertible bond always sells at a premium. 4. The major difference between convertible bonds payable and bonds payable issued with share warrants is that upon exercise of the share warrants a: The shares are held by the issuer for a certain period before issuance to the warrant holder. b. The holder has to pay a certain amount to obtain the shares. c. The shares involved are restricted. d. No share premium can be part of the transaction. 5. Convertible bonds a. Are separated into the liability component and the expense component. b. Allow an entity to issue debt financing at lower rate. c. Are separated into liability and equity components based on fair value. d. All of the choices are correct.
Transcribed Image Text:Problem 7-20 Multiple choice (IAA) 1. A bond convertible by the holder into a fixed number of ordinary shares of the issuer is a. A compound financial instrument b. A primary financial instrument c. A derivative financial instrument d. An equity instrument 2. Convertible bonds a. Have priority over other indebtedness. b. Are usually secured by a mortgage. c. Pay interest only in the event net income is sufficient to cover the interest. d. May be exchanged for equity shares. 3. What is the main reason for issuing convertible bond? a. The ease with which convertible bond is sold even if the entity has a poor credit rating. b. The fact that share capital has issue cost and convertible bond has none. c. Entities can obtain financing at lower rate. d. Convertible bond always sells at a premium. 4. The major difference between convertible bonds payable and bonds payable issued with share warrants is that upon exercise of the share warrants a: The shares are held by the issuer for a certain period before issuance to the warrant holder. b. The holder has to pay a certain amount to obtain the shares. c. The shares involved are restricted. d. No share premium can be part of the transaction. 5. Convertible bonds a. Are separated into the liability component and the expense component. b. Allow an entity to issue debt financing at lower rate. c. Are separated into liability and equity components based on fair value. d. All of the choices are correct.
Expert Solution
steps

Step by step

Solved in 4 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Types Of Bonds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS