A convertible bond has two separate sources of value: the bond investment value and the bond conversion value.

Question

Quizplus · Accepted Answer

A convertible bond can be converted into a predetermined number of common stock shares, in addition to providing a fixed income stream like a regular bond. This means that the bond has two ways of generating value for the investor – through interest payments and potential stock appreciation if the investor decides to convert the bond into shares.

A Convertible Bond Has Two Separate Sources of Value: the Bond