Question 3 (1 point) The value a convertible bond would have if it could not be converted into common stock is called the: O A) Conversion value. 0 3) Conversion ratio. 0 C) Straight bond value. 0 D) Conversion premium. 0 E) Conversion price. Question 5 (1 point) The upper bound of a call's value is equal to: O A) The exercise price. 0 B) The initial value when the call was written. 0 Cl The stock price. 0 D) The difference between the exercise price and the stock price. 0 El Zero. Question 6 (1 point) Given the following information, what is the value of d2 as it is used in the Black- Scholes Option Pricing Model? Stock price Time to expiration Risk-free rate Standard deviation O A) .250161 0 B) .175608 0 C) .021608 0 D) .125161 0 E) .200161 Question 7 (1 point) The buyer of a European call option has the: O A) Right but not the obligation to buy a stock at a specified price on a specified date. 0 B) Right but not the obligation to buy a stock at a specified price during a specified period of time. Q C) Obligation to buy a stock at the lower of the exercise price or the market price on the expiration date. 0 D) Obligation to buy a stock on a specified date but only at the specified price. 0 E) Obligation to buy a stock sometime during a specified period of time at the specified rice. Question 8 (1 point) Striking price can best be defined as: O A) The last day on which an option can be exercised. O B) The fixed price in the option contract at which the holder can buy or sell the underlying asset. Also the exercise price or strike price. 0 C) The act of buying or selling the underlying asset via the option contract. 0 D) A feature included in the terms of a new issue of debt or preferred shares to make the issue more attractive to initial investors. O E) The change in the stock price divided by the change in the call price. Question 9 (1 point) The current value of a firm is $1,400. The firm has $1,000 in pure discount debt due in one year and the risk-free rate is 6%. The firm's assets will be worth either $1,200 or $1,500 in one year. What is the interest rate on the debt? Question 10 (1 point) Suppose a firm has a total market value of $900 and outstanding debt with a face value of $850. The risk-free rate of interest is 6%. If the firm will have a value of either $650 or $900 next period, what is the rate of return on the firm's debt? (Assume the bond makes no coupon payments during this time period.) 0 A) 3.1% Question 11 (1 point) ________ are frequently offered as a sweetener by firms in combination with private placements of bonds or loans. 0 A) Call provisions 0 3) Put bonds 0 C) Warrants O D) Put options 0 E) Call options Question 12 (1 point) The maximum value of a convertible bond is theoretically: O A) Limited to the maximum straight bond value. 0 Bl Equal to the face value of the bond multiplied by (1 + conversion price). 0 C) Equal to the conversion value minus the straight bond value. 0 D) Limited by the face value of the bond. 0 E) Unlimited