7.Which of the following statements about convertible bonds is correct? 1.Before conversion, convertible bonds are treated as equity because they can be potentially converted to equity shares. 2.Holders are more likely to convert bonds to equity shares if stock price declines significantly. 3.Upon conversion, a gain or loss will be recognized. 4.The company who sells convertible bonds will pay interest at a lower interest rate.

8.For the following three types of dilutive securities: convertible bonds, convertible preferred stock, stock options which one (ones) involves security holders paying cash upon the conversion/exercise of the security (securities)? Enter 1, 2, 3, or 4 that represents the correct answer. 1. Convertible bonds and stock options. 2. Convertible bonds and convertible preferred stock. 3. Stock options only. 4. Convertible bonds only.