Question

Which of the following statement is correct?

a. All the answers are incorrect.

b. Unlike failure to make a scheduled interest or principal payment to common stockholders, failure to pay a scheduled dividend to preferred stockholders is a reason for making the company bankrupt.

c. The conversion ratio is the number of profit shares that an investor would get if the callable bond were converted.

d. Bonds rated Baa3 or above by Moody’s and BBB2 or above by Standard & Poor’s are called junk bonds.

e. Eurobonds are bonds denominated in the currency of the issuing company’s home country and sold in another country.

Answer 1

a. Nope

b. No, failure to pay a scheduled dividend to preferred stockholders is not a reason for making the company bankrupt.

c. Well, everything seems correct in this one except the words 'callable bonds'. Callable bonds are bonds that can be redeemed (or called) by the company before their maturity. Instead it should be 'convertible bonds' for this to be true.

d. False. Junk bonds are bonds which have a rating of Ba or lower by Moody's and BB or lower by S&P.

e. This is one is correct.