General characteristics of convertible bonds that will be converted include all of the following except:
A)the company will no longer have to repay the principal amount of the bonds.
B)management fully intends that the conversion privilege will eventually be attractive to the investors.
C)the investors will convert at or before maturity date.
D)the market price of the shares will drop below the conversion price.

Question

Quizplus · Accepted Answer

Convertible bonds are designed with the expectation that their conversion features will be attractive, allowing investors to convert their bonds into shares of the company, thus eliminating the need for the company to repay the principal. The conversion is expected to happen when it is financially beneficial for the investors, typically when the market price of the shares is above the conversion price, not below it.

General Characteristics of Convertible Bonds That Will Be Converted Include