1. The principle device used by the corporation to force conversion is:
a. setting the conversion price above the current market place.
b. reducing the amount of interest payments
c. buying bonds back at below par value
d. a call provision
2.Mirrless Corp. has 10,000 6.25% bonds convertible into 40 shares per $1000 bond. Mirrlees has 600,000 outstanding shares. Mirrless has a tax rate of 40%. The average Aa bond yield at time of issue was 10%. Compute basic earinings per share if after-tax earnings are $750,000.
a. $0.71
b.$1.25
c.$1.33
d.$1.51
3.Vickrey Technology has had net income of $2,000,000 in the current fiscal year. There are 1,000,000 shares of common stock outstanding along with convertible bonds, which have a total face value of $8 million. The$8 million is represented by 8,000 different $1,000 bonds. Each $1,000 bond pays 3% interest. The conversion ratio is 30. The firm is in a 30% tax bracket. What is Vickrey’s diluted earnings per share?
a. $1.75
b.$1.81
c.$2.00
d.None of the above
4.Jacobs and Company has warrants outstanding, which are selling at a $3 premium above intrinsic value. Each warrant allows its owner to purchase one share of common stock at $25. If the common stock currently sells for $28, what is the warrant price?
a. $6
b.$10
c.$12
d.$14
5. Warrants are:
a. long-term options to sell shares of the issuing firm’s stock.
b. fairly stable, low-risk investments
c. investments whose value is directly related to the price of the underlying stock.
d. structured to sell for precisely their intrinsic value.
6. Sen Corporation warrants carry the right to buy 10 shares of Sen common stock at $3.50 per share. The common stock has a current market price of $4.25 per share. What is the intrinsic, or minimum, value of one Sen warrant?
a.$.75
b.$7.50
c.$15
d.$0
7. A warrant that does NOT expire until several years in the future provides its owner the opportunity to buy a stock. If the stock price rises, the warrant will probably sell for:
a. less than its intrinsic value
b. exactly its intrinsic value
c. more than its intrinsic value
d. less than or equal to its intrinsic value
8. A contract giving the owner the right to buy or sell an asset at a fixed price for a given period of time is a /an
a. common stock
b. options
c. futures
d. capital investments
9. The owner of a call has the right:
a. and the obligation to buy an asset at a given place
b. and the obligation to sell an asset at a given price
c. but not the obligation to buy an asset at a given price
d. but not the obligation to sell an asset at a given price
10. The owner of a put has the right:
a. and the obligation to buy an asset at a given
b. and the obligation to sell an asset at a given price
c. but not the obligation to buy an asset at a given price
d. but not the obligation to sell an asset at a given price