Multiple choice

1. A share of preferred with a $100 par value, which pays a 12% dividend, should have a current price of _____ when the dividend yield is 10%?

A. $100

B. $12;

C. $83;

D. $120

2. Convertible bonds can generally be converted into

A. share of the issuing company's common stock.;

B. parcels of mortgage pass-through certificates.

C. additional shares of debenture bonds.

D. shares of the issuing company's preferred stock.;

3. A convertible bond has a par value of $1000 and a conversion price of $74. How many shares can the bondholder receive in exchange for the bond?

A. 11.2 shares;

B. 9.8 shares;

C. 13.5 shares.

D. 7.4 shares;

4. Which of the following statements about conversion premiums is (are) correct?1. Conversion premiums often amount to as much as 25 to 30% or more of an issue's true conversion value.2. Conversion premiums tend to fade away as the price of the convertible goes up.

A. 1 only;

B. 2 only;

C. Both 1 and 2;

D. Neither 1 or 2.