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FINC 3350 Financial Institutions and Markets Fall 2019 16. You purchase a $1,000 face value convertible bond for $950. The bond can be converted into 250 shares of stock. The stock is currently priced at $5.25. What is the conversion price (the price above which you will choose to convert bond into shares at maturity)? A) $3.8 B) $4 C) $5 D) $5.25 17. When would it make sense for a firm to call a bond issue? A) when the market price of the bond exceeds the call price, and market interest rates are less than the bond's coupon rate. B) when the market price of the bond exceeds the call price, and market interest rates are greater than the bond's coupon rate. C) when the market price of the bond is less than the call price, and market interest rates are greater than the bond's coupon rate. D) when the market price of the bond is less than the call price, and market interest rates are less than the bond's coupon rate 18. What is the interest payment (coupon amount) of following TIPS 10-year note at the end of the first year since issuance? 1) value at issuance (par value) $1,000; 2) stated rate of interest (annual coupon rate) = 6% payable annually; 3) CPI at issuance = 100; 4) 4% annual inflation rate. A) $58.5 B) $60 C) $62.4 D) $100 19. A firm issues $100 million in ten-year bonds with an annual coupon rate of 10%. The firm uses a sinking fund to repurchase 10% of the bond issue on each coupon payment date. What payment must they make on the tenth and final coupon payment? A) $10 B) $15 C) $20 D) $25 20. You want to buy a $500,000 house and you will use a conventional mortgage. What is the minimum down payment you must make to avoid having to purchase mortgage insurance? A) $80,000 B) $100,000 C) $125,000