Many holders of convertible bonds will not convert when the firm's common stock price exceedsthe conversion price. To protect itself against this behavior, the firm includes _____________on the convertible security.

Question

Quizplus · Accepted Answer

A call feature allows the issuer of the convertible security to force conversion of the bonds into common stock at a predetermined price, regardless of whether the bondholder wants to convert or not. This protects the firm against bondholders who hold onto their bonds even when the stock price exceeds the conversion price.

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