Question

The principal of a bond is ________.

1. the person who sold the bond for the company
2. the person who bought the bond
3. the interest rate printed on the front of the bond
4. the face amount of the bond that will be paid back at maturity.

   A convertible bond can be converted into ________.

5. preferred stock
6. common stock and then converted into preferred stock
7. common stock of a different company
8. common stock of the company

Answer 1

Answer 1:

D: The face value of bond

Explanation:

The principal of the bond refers to the par value or the face value of the bond or a debenture. The person who purchases a bond is known as a bond holder.

The interest rate of the bond is known as the coupon rate.

Hence,

Option 'D' is correct and rest all are incorrect.

Answer 2:

H: Common stock of a company

Explanation:

The convertible bonds are those bonds that give interest to the bond holders for few years and then are converted into COMMON STOCK of the same company of which bonds were purchased.

The bonds are never converted into preferred stock or stocks of another company.

Hence,

Option 'H' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.