Which ONE of the following statements is true?
A) To secure the conversion option on a bond, bondholders would be willing to pay a premium.
B) The conversion ratio is set so that the company's share price must appreciate 15 to 20 percent before it is profitable to convert bonds into equity.
C) Convertible bonds can be converted into ordinary shares at some predetermined ratio at the discretion of the bondholder.
D) All of the above are true.

Question

Quizplus · Accepted Answer

Convertible bonds offer the bondholder the option to convert the bond into a predetermined number of shares of common stock at a specified price. The conversion ratio is set so that the company's share price must appreciate 15 to 20 percent before it is profitable to convert bonds into equity. To secure the conversion option on a bond, bondholders would be willing to pay a premium.

Which ONE of the Following Statements Is True