1. A bond that offers shareholders the right to buy back the bond is referred to: A. zero coupon B. collateralized C. callable D. convertible 2. Which of the following is a feature of warrants? A. It is a right to sell. B. Shares will be diluted. C. Issued by any investment bank. D. Usually expired in short period of time e.g. months. 3. Why bond can be viewed as an option? A. Bonds can be mixed with option features like callable and convertible. B. Shareholders have purchased the option to default from bond holders. C. Bondholders can choose to convert the bonds into shares. D. Bondholders lay claim to company's assets upon default and thus have a long position in options on firm. 4. Which of the following will decrease the price of a callable bond? A. Increase in call price B. Increase in coupon rate C. Increase in risk-free rate D. Increase in the value of d and decrease in the value of u in the binomial model 5. In a convertible bond, the_(1) _owns the convertible option and hence pay (2) for the bond. A. (1) shareholder (2) more B. (1) shareholder (2) less C. (1) bondholder (2) more D. (1) bondholder (2) less