Convertible Bonds Quiz

What type of fund is First Convergence Inc.?

• Mutual Fund

• Convertible Arbitrage Hedge Fund

• Venture Capital Fund

• Private Equity Fund

Why did Mary Lucas stay late at work?

• She had pending trades

• She was analyzing equity options

• She wanted to learn more about convertible bonds

• She had a meeting with her supervisor

What unusual trading activity did Lucas notice?

• A bond price spike

• Stock price increase

• Convertible bond trading volume surge

• Drop in bond ratings

What are LYONs?

• Short-term treasury bills

• Liquid Yield Option Notes

• Long-term equity securities

• Preferred stock instruments

What was the main difference between the new and old convertible bonds?

• Different maturity dates

• Settlement terms on conversion

• Coupon rates

• Collateral structure

On what date did Countrywide announce the earnings that disappointed analysts?

• August 20, 2004

• September 17, 2004

• October 20, 2004

• October 22, 2004

What did the new convertible bonds allow upon conversion?

• Only shares

• Only cash

• Mix of cash and stock

• Fixed coupon payouts

What was the conversion ratio of the new securities?

• 45.000

• 46.2820

• 50.0000

• 40.0000

What was the average trading price of Countrywide stock during the last month before October 22, 2004?

• $20

• $30

• $37

• $45

What triggered the drop in Countrywide's stock price on October 20, 2004?

• SEC investigation

• Missed earnings expectations

• Interest rate hike

• Stock split announcement