Which of the following is most likely to happen with a convertible bond when the market price of the share exceeds the conversion price. The share does not pay a dividend.
A) The issuing company will call the bonds and bondholders will convert them to ordinary shares.
B) Both the issuing company and the bondholders will wait for the bonds to reach their maturity date.
C) The issuing company will call the bonds and the bondholders will redeem them for the call price.
D) The bondholders will immediately convert their bonds to share.

Question

Quizplus · Accepted Answer

When the market price of the share exceeds the conversion price, it is advantageous for bondholders to convert their bonds into shares. The issuing company may call the bonds to encourage conversion and reduce debt.

Which of the Following Is Most Likely to Happen with a Convertible