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Useful questions compiled by experts.
NEW QUESTION: 1
[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.] The profit potential from the conversion of convertible bonds into stock is limited by
A. conversion premium charged by the issuer
B. a rise in interest rates
C. volatility of the stock
D. the issuer's option to call the security at short notice
Answer: D
Explanation:
Explanation
The profit potential from the conversion of convertible bonds into stock is limited by the issuer's option to call the security at short notice. Generally, the convertible debt security is convertible into a certain number of shares, and the debt holder will generally not convert the security to shares unless there is a profit to be made.
The 'premium' is irrelevant, because as long as the premium exists, the debt holder has no incentive to convert, as he would be better off buying the shares in the market. It is only when share prices go beyond a level that it becomes advantageous convert the security into shares. However, the prospect of granting cheap shares to the debt holders is not too appealing to the issuer, and as soon as the share price goes beyond a point where the value of the shares exceeds the face value of the debt the issuer has an incentive to exercise its option to call the security.
Therefore the profit potential from the conversion of convertible bonds into shares is limited by the issuer's option to call the security, and Choice 'a' is the correct answer. The 'premium', or interest rates, or volatility are irrelevant.
NEW QUESTION: 2
Employee system works on:
A. full-service approach
B. All of the above
C. three-tier landscape
D. black box approach
Answer: B
NEW QUESTION: 3
When VPRN Outbound Route Filtering (ORF) is enabled, each PE sends its ORF list to its peer using which of the following BGP message types?
A. Open
B. Route Refresh
C. Update
D. Notification
Answer: B
NEW QUESTION: 4
Click the exhibit.
Which of the following best describes the output?
A. The AS-Path is not present because a policy is configured on PE1 to set it to null.
B. The AS-Path is not present because VPN-IPv4 routes do not propagate the IPv4 AS-Path BGP attribute.
C. The AS-Path is not present because a policy is configured on PE2 to set it to null.
D. The AS-Path is not present because a policy is configured on CE1 to set it to null.
Answer: A
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