Based on empirical studies, ﬁrms tend to call convertible bonds when the conversion value is:
A)less than the conversion price.
B)greater than the straight bond value.
C)greater than the call price.
D)less than the face value.
E)None of the above.

Question

Quizplus · Accepted Answer

Firms tend to call convertible bonds when the conversion value is greater than the call price, as this situation often indicates that it is financially advantageous for the firm to do so, encouraging conversion into equity to reduce debt obligations.

Based on Empirical Studies, ﬁRms Tend to Call Convertible Bonds