Which of the following statements about convertible bonds are true? I. The conversion price does not...
Which of the following statements about convertible bonds are true?
I. The conversion price does not change over time.
II. The associated stocks may not pay dividends as long as the bonds are outstanding.
III. Most convertibles are also callable at the discretion of the firm.
IV. They may be thought of as straight bonds plus a call option.
Homework Answers
Ans III. Most convertibles are also callable at the discretion of the firm. and IV. They may be thought of as straight bonds plus a call option.
A convertible bond is a fixed income debt securty that gives periodic interest payments. It can be converted into equity shares at a time as per the policy of the company and on the discretion of the bondholder.
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