If the price of common stock falls, the value of a convertible preferred stock will also tend to fall.

Question

Quizplus · Accepted Answer

Convertible preferred stock can be converted into a specific number of shares of common stock, so its value is influenced by the price of the common stock. If the price of the common stock falls, the potential value obtained from converting the preferred stock decreases, thus generally leading to a decrease in the value of the convertible preferred stock.

If the Price of Common Stock Falls, the Value of a Convertible