QUESTION 6Which one of the following statements about convertible bonds is not correct?O A. Conversion rights can be separated from the bond and sold on in the rights marketO B. Conversion ratio is the number of shares offered per bondO. Conversion value depend in part on the share price growth rateO D. The interest rate on convertible bonds is less that the interest rate on ordinary or straight bondsO E. Convertible bonds increase debt capacity on conversion QUESTION 5The 10% convertible debt of Millfield plc is convertible in four years' time at a rate of 20 shares per bond, or redeemable infour years' time at a par value of £100. The current share price of Millfield is £4.00 and this is expected to grow at 8%per year. If Millfield plc has a cost of debt of 12%, what is the current ex interest market value of its convertible debt?(Ignore taxation and work to the nearest 10p).O A. £81.30O B. £94.00OC. £99.60O D.£106.10O E. £108.80

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QUESTION 6 Which one of the following statements about convertible bonds is not correct? O A. Conversion rights can be separated from the bond and sold on in the rights market O B. Conversion ratio is the number of shares offered per bond Oc. Conversion value depend in part on the share price growth rate OD. The interest rate on convertible bonds is less that the interest rate on ordinary or straight bonds O E. Convertible bonds increase debt capacity on conversion

QUESTION 6 Which one of the following statements about convertible bonds is not correct? O A. Conversion rights can be separated from the bond and sold on in the rights market O B. Conversion ratio is the number of shares offered per bond Oc. Conversion value depend in part on the share price growth rate OD. The interest rate on convertible bonds is less that the interest rate on ordinary or straight bonds O E. Convertible bonds increase debt capacity on conversion

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

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Which of the following is FALSE regarding bonds? Long term bonds have greater interest rate risk than do short term bonds. A bond indenture describes the terms of the bond issue. Bonds represent ownership in the company. if interest rates in the market go up, the present value of existing bonds goes down. A bond issuer is legally required to make the interest payments and repay the par value at maturity. Previous Page Next Page Page 12 of 30
The time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates change
Zero coupon bonds: O a. create annual taxable income to individual bondholders. O b. create a tax deduction for the issuer only at maturity. O care issued only by the U.S. Treasury. O d. are issued at a premium. O e. are valued using simple interest.
Question 26 The of a convertible bond is what the bond would be worth if it were immediately converted into common stock.
What is a convertible bond? If a company decidesto raise capital by issuing convertible bonds, howwould the terms on the bond be set? Considerspecifically the maturity, coupon rate, and callfeatures of the bond, as well as the conversionprice (or conversion ratio), together with any otherparameters required for the analysis.
6
What causes a gain or loss on the sale of a bond investment? Group of answer choices when the selling company negotiates a better price when the selling price of the bond differs from the book value (cost) of the bond when the selling company has unamortized discounts when the selling company has unamortized premiums
Can I use the yield to maturity (YTM) on a bond issued by the company as the cost of debt? A Yes, you can use the YTM B No, you cannot use the YTM C Only if the bond is liquid and has not special feature embedded in it D There is not enough information to answer this problem
1. what is the interest expense recognized for the year 2021? 2. what is the share premium to be recognized in relation to the conversion of the convertible bonds?
Question 4 Assuming a bond is issued at a discount, which of the following would definitely not change over the life of the bond? A The yield to maturity of the bond B The price of the bond C The coupon rate of the bond D The current yield of the bond
8. Which is least likely true about bonds? a. It is a financial security. b. The issuer has the obligation to make specified payments. c. Bondholders have the right to make decisions on the firm's affairs. d. Bondholders have the right to claim interest payments. е. с &d f. All of the above g. None of the above
43. Bobbi Proctor does not want to “ gamble ” on Social Security taking care of her in retirement . Hence she wants to begin to plan now for retirement . She has enlisted the services of Hackney Financial Planning to assist her in meeting her goals . Proc tor has determined that she would like to have a retirement annuity of $ 200,000 per year , with the first payment to be received 36 years from now at the end of her first year of retirement . She plans a long , enjoyable retirement of about 25 years . Proctor wishes to save $ 5,000 at the end of each of the next 15 years , and an unknown , equal end - of - period amount for the remaining 20 years before she begins her retirement Hackney has advised Proctor that she can safely assume that all savings will earn 12 percent per annum until she retires , but only 8 percent thereafter . How much must Proctor save per year during the 20 years preceding retirement ? EBK CONTEMPORARY FINANCIAL MANAGEM chapter5, problem 43

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