SIE Exam Question 1007: Answer and Explanation

Question: 1007

All but which of the following are correct regarding a convertible bond?

• A. It is a type of corporate bond that may be converted into common stock of the issuing corporation.
• B. It may be converted at the bondholder's discretion.
• C. It allows an investor to share in the growth of the corporation only if the bond is converted into common stock.
• D. It is a zero-coupon bond issued at a discount to par.

Correct Answer: D

Explanation:

A convertible bond is a type of corporate bond that may be converted into common stock of the issuing corporation at the bondholder's discretion. It allows an investor to share in the growth of the corporation only if the bond is converted into common stock.