As the stock price moves higher,the conversion premium that the investor is willing to pay becomes:

Question

Quizplus · Accepted Answer

The conversion premium is the amount that an investor will pay above the current market price of the common stock to purchase a convertible security. As the market price of the underlying stock moves higher, the value of the convertible security also increases. This means that the premium paid by investors to purchase the convertible security becomes lower, as they are already receiving more value from the underlying stock. Therefore, the answer is C) Lower.

As the Stock Price Moves Higher,the Conversion Premium That the Investor