Many holders of convertible bonds will not convert when the firm's common stock price exceeds the conversion price because

Question

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Holders of convertible bonds receive the market price benefit through the bond's ability to be converted to common stock. They may choose not to convert because they can still receive fixed periodic interest payments, which are not impacted by changes in the common stock price. Additionally, conversion may dilute EPS, leading investors to hold onto their bonds instead of converting to common stock.

Many Holders of Convertible Bonds Will Not Convert When the Firm's