ch 16

They already come with answers, but you need to come up with your additional/complementary explanations on why the answer is correct.

1. An increase in interest rates __________ the value of a convertible bond as stock.

2. A decrease in a stocks price __________ the conversion value of a bond.

3. An increase in a stocks price __________ the value of a convertible bond as debt.

4. As the price of the stock increases, the premium over the convertible bonds value as stock __________.

5. An increase in conversion (exercise) price of a bond __________ the conversion ratio.

6. The investment (stock) value of a convertible bond __________ if the price of the stock increases.

7. An increase in a convertible bonds premium over its value as debt implies that the premium over its value as stock __________.

8. The value of a convertible bond as debt __________ as interest rates rise.

9. As the premium over a convertible bonds value as debt rises, it suggests that the potential for loss __________.

10. An increase in the conversion value of convertible preferred stock occurs when the price of the stock __________.

11. Dividends paid by the stock into which a bond may be converted __________ the payback period necessary to overcome the time premium.

12. An increase in interest rates __________ the probability that a convertible bond will be called.

13. An increase in a stocks price __________ the value of the firms put bonds.

14. An increase in interest rates __________ the probability that a bonds put option will be exercised.

15. By offering put and conversion features, issuing companies __________ interest costs.

ANSWER!! 1. does not affect (no change) 2. decreases 3. does not affect (no change) 4. decreases 5. decreases 6. increases 7. decreases 8. decreases 9. increases 10. increases 11. increase 12. decreases 13. does not affect (no change) 14. increases 15. decrease