Chapter 6

Question 1

Advantages of buying convertible bonds.

Answer 1

Consistent interest payments, appreciation if stock rises, downside protection if stock falls

Question 2

The value of two investments being equal, even, or the same

Answer 2

Parity

Question 3

The strike price for conversion on a reverse convertible is also called the _____ price.

Answer 3

knock-in

Question 4

What is likely to happen if a company’s stock price becomes worth more than the bonds call price?

Answer 4

Forced conversion

Question 5

A reverse convertible structured product is linked to:

Answer 5

the performance of an unrelated reference asset

Question 6

If a bond is referred to as trading flat, this means that it trades:

Answer 6

without accrued interest

Question 7

Bonds that are dollar-denominated, U.S. registered, and issued by multinational companies and foreign governments?

Answer 7

Yankee Bonds

Question 8

Equipment Trust Bond

Answer 8

A bond backed by machinery or rolling stock