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Bizhelp, CPA
Category: Multiple Problems
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Experience:  BA degree and Certified Public Accountant
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Question 1 of 20 A convertible bond is currently selling

Resolved Question:

Question 1 of 20

A convertible bond is currently selling for $945. It is convertible into 15 shares of common which presently sell for $57 per share. What is the conversion premium?
A. $90

B. $45

C. 57 shares

D. 13 shares


Question 2 of 20

The conversion ratio is the:
A. price at which a convertible security is exchanged into common stock.

B. ratio of conversion value to market value of a convertible security.

C. number of shares of common stock into which the convertible may be converted.

D. ratio of the conversion premium to market value of a convertible security.


Question 3 of 20

The conversion premium will be large:
A. if investors have great expectations for the price of the common stock.

B. if interest rates decline.

C. when the conversion value is much greater than the pure bond value.

D. when the stock price is very stable.


Question 4 of 20

A convertible bond is currently selling for $1335. It is convertible into 20 shares of common which presently sell for $56 per share. What is the conversion premium?
A. $335

B. $215

C. 66.74 shares

D. 23.8 shares


Question 5 of 20

A $1,000 par value bond with a conversion price of $40 has a conversion ratio of:
A. $25.

B. 25 shares.

C. $40.

D. 40 shares.


Question 6 of 20

The theoretical floor value for a convertible bond is its:
A. conversion price.

B. conversion value.

C. par value.

D. pure bond value.


Question 7 of 20

The conversion premium is the greatest and the downside risk the smallest when the:
A. conversion value equals the pure bond value.

B. conversion value is greater than the pure bond value.

C. conversion value is less than the pure bond value.

D. stock price is expected to go up drastically.


Question 8 of 20

The interest rate on convertibles is generally __________ the interest rate on similar nonconvertible instruments.
A. greater than

B. less than

C. the same as

D. at least twice


Question 9 of 20

Conversion price is usually set __________ the prevailing market price of the common stock at the time the bond issue is sold.
A. at

B. below

C. above

D. at one half of


Question 10 of 20

The principle device used by the corporation to force conversion is:
A. setting the conversion price above the current market price.

B. reducing the amount of interest payments.

C. buying bonds back at below par value.

D. a call provision.


Question 11 of 20

Mirrlees Corp. has 10,000 6.25% bonds convertible into 40 shares per $1000 bond. Mirrlees has 600,000 outstanding shares. Mirrlees has a tax rate of 40%. The average Aa bond yield at time of issue was 10%. Compute basic earnings per share if after-tax earnings are $750,000.
A. $0.71

B. $1.25

C. $1.33

D. $1.51


Question 12 of 20

Vickrey Technology has had net income of $2,000,000 in the current fiscal year. There are 1,000,000 shares of common stock outstanding along with convertible bonds, which have a total face value of $8 million. The $8 million is represented by 8,000 different $1,000 bonds. Each $1,000 bond pays 3 percent interest. The conversion ratio is 30. The firm is in a 30 percent tax bracket. What is Vickrey's diluted earnings per share?
A. $1.75

B. $1.81

C. $2.00

D. None of the above


Question 13 of 20

Jacobs and Company has warrants outstanding, which are selling at a $3 premium above intrinsic value. Each warrant allows its owner to purchase one share of common stock at $25. If the common stock currently sells for $28, what is the warrant price?
A. $6

B. $10

C. $12

D. $14


Question 14 of 20

Warrants are:
A. long-term options to sell shares of the issuing firm's stock.

B. fairly stable, low-risk investments.

C. investments whose value is directly related to the price of the underlying stock.

D. structured to sell for precisely their intrinsic value.
Submitted: 2 years ago.
Category: Multiple Problems
Expert:  FiveStarLaw replied 2 years ago.
Welcome to JustAnswer,

Thank you so much for directing your questions. When do you need the answers?
Customer: replied 2 years ago.
in about an hour
Expert:  FiveStarLaw replied 2 years ago.
Hello,

I am going to opt out of your question as I do not believe I can answer within the time frame.

Your JA Account has not been charged for this conversation and your question is back in the queue.

You do not have to stay online for the question to be active. Should an expert pick it up, you should be alerted via email and/or SMS unless you actively disable these features.

No need to reply as this may "lock" your question back to me, thus delaying other experts' access to it.

My apologies for any inconvenience and Good luck.
Customer: replied 2 years ago.

ok thanks

 

Expert:  Bizhelp replied 2 years ago.
Hi,

Thanks for the questions.

I am working on them and will answer within the next 30 minutes or so.




Customer: replied 2 years ago.
ok thanks
Expert:  Bizhelp replied 2 years ago.
Bizhelp, CPA
Satisfied Customers: 5761
Experience: BA degree and Certified Public Accountant
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