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A company currently has $125,000,000 of 3 1/4% convertible bonds. The company is going to offer $125,000,000 of 3 1/4% nonconvertible bonds plus cash of $15,000,000 for the convertible bonds. How will this transaction, if successful, affect the company's financial status?

It will reduce the cash and debt position and reduce the potential dilutive effect on the common stock.
It will reduce the cash position and increase the debt position.
It will increase the cash position and reduce the potential dilutive effect on the common stock.
It will reduce the cash position and the potential dilutive effect on the common stock.

It will reduce the cash position and the potential dilutive effect on the common stock.

A corporation has $125,000,000 of convertible bonds outstanding. The conversion price is $50. The corporation refunds $75,000,000 of the bonds for nonconvertible bonds. How many additional shares of common stock will be outstanding if the remaining bonds are converted?
1,000,000 shares
1,500,000 shares
2,000,000 shares
2,500,000 shares

1,000,000 shares

A bond is convertible at $40 and is selling in the market for 120. If the stock has a current market price of $50, the parity price for the bond would be:
$960
$1,200
$1,250
$1,500

$1,250

2 If a corporation went bankrupt, any remaining assets would be distributed in which of the following orders of priority?
Common stockholders
Mortgage bondholders
Convertible bondholders
Unpaid workers
IV, II, III, and I
IV, III, II, and I
II, III, I, and IV
III, II, IV, and I

IV, II, III, and I

Wholesale corporate bond quotes can be found in the:
Pink sheets
White sheets
Green sheets
Yellow sheets

Yellow sheets

XYZ convertible debentures are convertible into 20 shares of XYZ Corporation common stock. If the bonds were selling in the market at $960, what would the common stock have to be selling for to be on parity?
$25
$45
$48
$50

$48

If a corporation is in a liquidation, the holder of a subordinated debenture would be paid:
Before bank loans and before accounts payable
Before bank loans and after accounts payable
After bank loans and before accounts payable
After bank loans and after accounts payable

After bank loans and after accounts payable

A corporation would be considered in default if it did not pay interest on all of the following EXCEPT:
Second mortgage bond
Debenture
Subordinated debenture
Adjustment bond

Adjustment bond

All of the following are TRUE regarding convertible bonds EXCEPT:
The bonds can be used for collateral
The bonds are usually debentures
The coupon rate on the bonds is higher than on similar nonconvertible bonds
The bonds can be converted into common stock

The coupon rate on the bonds is higher than on similar nonconvertible bonds

f a customer's objectives are safety of principal and income, you as the account executive could suggest all of the following EXCEPT:
AAA rated corporate bonds
High-grade preferred stocks
High-grade mortgage bonds
Income bonds

Income bonds

1 When a corporation goes bankrupt, which of the following creditors would be the last to be paid?
Internal Revenue Service
Debenture holders
Preferred stockholders
Common stockholders

Debenture holders

A corporation has issued a bond with a 5% coupon that is convertible into common stock at $40. The bond is selling at its par value.
If the bond increased in value by 20 points, what is parity for the stock?

$25
$40
$48
$50

$48

American Telephone Company of Ohio is offering $50,000,000 worth of 9% bonds at a price of 99.25% of par value. The State of Ohio has a state income tax. A buyer of the bond would be:
Subject to state income tax
Exempt from state income tax
Subject to federal income tax
Exempt from federal income tax
I and III
I and IV
II and III
II and IV

I and III

A DEF corporation convertible bond is convertible at 40. DEF common is selling at 50. At what price should the bond be selling for it to be at a 10% premium to the common?
80
88
125
137 1/2

137 1/2

A tombstone ad states that Southern California Gas is issuing 8 3/4% first mortgage bonds at a price of 96.35% of their par value.
The payment of interest and principal on the bond is secured by:

The general credit of the State of California
The mortgages on property owned by the State of California
The State of California
A lien on property owned by Southern California Gas

A lien on property owned by Southern California Gas

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