6. When is the best time to convert a convertible bond to common stock?

1. When the call price exceeds the conversion value
2. After the conversion ratio decreases
3. When the conversion value is below the pure bond value
4. None of the above

7. Which of the following is NOT a characteristic of put and call options?

1. They are contracts to buy or sell 100 shares of common stock
2. There is always a specified price
3. There is always a specified time period to exercise options
4. All of the above are characteristics

8. A stock is selling for $45.75 with a call option available at a $40 strike that has a premium of $7.50. What percentage of the common stock price does the speculative premium represent?

a. 14.375% b. 12.57% c. 4.38% d. 3.83%

9.Characteristics of mutual funds include everything except:

1. Different investors can pool their money
2. The money is invested in stable companies, with an objective of strong dividend income
3. Funds not included in the mutual fund are placed in short-term T-bills to earn interest
4. The money is invested in stable companies' common stock

10.The difference between speculators and hedgers is that speculators are .. while hedgers are

1. Risk-takers; risk averters
2. Individual investors; financial managers
3. Short term; long-term
4. None of the above