Stocks Intermediate: Introduction to Convertibility

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Compared to a companys common stock, its convertibles generally are less volatile.
Choose wisely. There is only one correct answer.
True. If the companys common stock price declines, the price of its convertibles usually will not fall as far.
2.
The conversion price is usually lower than the current price of the companys common stock.
Choose wisely. There is only one correct answer.
False. The conversion price is usually higher than the current price of the companys common stock.
3.
A convertible security is often in the form of _______.
Choose wisely. There is only one correct answer.
Preferred stock or corporate bonds. Convertibles are often preferred stocks or bonds that can be exchanged for the companys common stock.
4.
Convertible securities are often more marketable than straight securities because investors ________.
Choose wisely. There is only one correct answer.
Are attracted to the convertibility feature. To obtain the convertibility feature, many investors are willing to pay a premium.
5.
An owner of convertible securities usually can exchange those securities for common stock issued by another company.
Choose wisely. There is only one correct answer.
False. An owner of convertible securities can exchange them for the common stock of the same company.