1. Which of the following statements concerning junk bonds is most correct? A. j
ID: 2642903 • Letter: 1
Question
1. Which of the following statements concerning junk bonds is most correct?
A. junk bonds may also be called low- yielding securities.
B. Junk bonds have higher interest rates than AAA- rated bonds because of higher risk
C. A rational investor will always prefer a AAA- rated bond to a junk bond
D. Junk bonds are priced higher than AAA- rated bonds because junk bonds are more risky.
2. Which of the following statements is true regarding convertible bonds:
A. The holder can convert these bonds into an equal number of new bonds if they choose to do so.
B. the holder has the right to sell these bonds back to the issuer if the bonds dont perform well.
C. these bonds are convertible into common stock of the issuing firm at a prespecified price.
D. these bonds have a variable interest rate.
Explanation / Answer
1.
B. Junk bonds have higher interest rates than AAA- rated bonds because of higher risk
2.
A. The holder can convert these bonds into an equal number of new bonds if they choose to do so.
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