Many securities contain an option that is included as part of a bond or preferred share,which allows the holder to convert the security into a predetermined number of shares.This feature is called a:
A) conversion feature.
B) put option.
C) repurchase agreement.
D) warrant.

Question

Quizplus · Accepted Answer

The option that is included as part of a bond or preferred share, which allows the holder to convert the security into a predetermined number of shares, is called a conversion feature. This feature gives the holder the right to convert the security into equity shares at a predetermined conversion rate. This allows the holder to benefit from any potential appreciation in the value of the underlying shares. The other options listed (B, C, and D) are not correct as they do not refer to this specific feature of the security.

Many Securities Contain an Option That Is Included as Part