The price of a convertible bond is often
1. greater than its value as stock
2. less than its value as stock
3. greater than its value as debt
4. less than its value as debt
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Question

The price of a convertible bond is often
1. greater than its value as stock  
2. less than its value as stock
3. greater than its value as debt
4. less than its value as debt
A)1 and 3
B)1 and 4
C)2 and 3
D)2 and 4

Quizplus · Accepted Answer

The price of a convertible bond is often greater than its value as debt because it includes the additional value of the option to convert into stock. It can also be greater than its value as stock when the bond features (like interest payments) add value beyond the pure equity component.

The Price of a Convertible Bond Is Often