As the price of common stock rises,
A) the value of convertible bonds and convertible preferred stock declines
B) the value of convertible bonds falls but convertible stock rises
C) the value of convertible bonds rises but convertible preferred stock falls
D) the value of convertible bonds and convertible preferred stock rises

Question

​As the price of common stock rises,
A) ​the value of convertible bonds and convertible preferred stock declines
B) ​the value of convertible bonds falls but convertible stock rises
C) ​the value of convertible bonds rises but convertible preferred stock falls
D) ​the value of convertible bonds and convertible preferred stock rises

Quizplus · Accepted Answer

Convertible bonds and convertible preferred stock typically increase in value as the price of the underlying common stock rises, because the conversion feature becomes more valuable.

​As the Price of Common Stock Rises

As the Price of Common Stock Rises