A company issues a convertible bond.Management can essentially force conversion as long as:
A)The share price is lower than the conversion price
B)The share price is higher than the conversion price
C)The share price is equal to the conversion price
D)None of these answers are correct

Question

Quizplus · Accepted Answer

Management would typically force conversion when the share price is higher than the conversion price. This is because the incentive for bondholders to convert their bonds into shares increases as the value of the shares exceeds the conversion price, making conversion more attractive to them and allowing the company to replace debt with equity.

A Company Issues a Convertible Bond