1) The total amount of interest that a 10-year investment earns will exactly dou

Question

1) The total amount of interest that a 10-year investment earns will exactly double when the stated annual interest rate is doubled.
a. True
b. False

2) Beginning with an investment in one company's securities, as we add securities of other companies to our portfolio, which type of risk declines?
a. Systematic risk.
b. Market risk.
c. Non-diversifiable risk.
d. None of the above.

3) Which of the following is/are true regarding contingent convertible bonds:
a. The holder has the right to put these bonds back to the issuer if the bonds don't perform well.
b. The holder can convert these bonds into an equal number of new bonds if they choose to do so.
c. These bonds are convertible into common stock of the issuing firm.
d. All of the above are true.

Explanation / Answer

1. b) False
2.a. Systematic risk .

3.c. These bonds are convertible into common stock of the issuing firm

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