Question

1. Convertible bonds are suitable for investors who

Select one:

1. want the possibility of benefiting from a rise in the issuer's share price.
2. have a lower risk tolerance and are seeking income.
3. want to maximize interest returns in periods when interest rates are low.
4. want to convert the bond into a longer term at the same rate of interest.

2. The contractual rate of interest on a bond is always stated as a(n)

Select one:

1. daily rate.
2. monthly rate.
3. semi-annual rate.
4. annual rate.

3. A corporate bond trading at below par will have

Select one:

1. a current yield lower than the equivalent government maturity.
2. a lower yield to maturity than the coupon rate.
3. the same yield it had when it was issued.
4. a higher yield to maturity than the coupon rate.

4. The difference between common and preferred stock is that preferred stock

Select one:

1. may or may not receive dividends.
2. has predictable income and more safety.
3. has greater potential for capital appreciation.
4. is issued more frequently than common stock.

Answer 1

Answer 1 a  

Convertible binds are the those bonds which get converted into share after certain period of time, and the holder will get the benefit of increase in prices.

2 d

The bond is always stated at an annual rate of interest.

3 d

If the current price of bond is less that par value, it means the investor will get more amount than invested at the time of maturity and thus yield will be higher than coupon rate

4 b

The preferred stock has fixed rate of dividend and have preference over payment to common stock. Thus it has predictable income and more safety.