Which of the following statements is true regarding convertible bonds?
A) These bonds have a variable interest rate.
B) The holder can convert these bonds into an equal number of new bonds if they choose to do
so.
C) The holder has the right to sell these bonds back to the issuer if the bonds don't perform well.
D) These bonds are convertible into common stock of the issuing firm at a prespecified price.
Question 2
Which of the following statements concerning junk bonds is MOST correct?
A) Junk bonds may also be called low-yielding securities.
B) A rational investor will always prefer a AAA-rated bond to a junk bond.
C) Junk bonds have higher interest rates than AAA-rated bonds because of the higher risk.
D) Junk bonds are priced higher than AAA-rated bonds because junk bonds are more risky.