Which of the following is true regarding convertible bonds?
A) A convertible bond's value will exceed the sum of the straight bond value and the conversion value unless the firm is in default or bondholders are forced to convert.
B) When a convertible bond is converted into common stock, the company receives cash for the transfer.
C) The floor price of a convertible bond is the greater of the straight bond value and the conversion value.
D) The conversion value of a convertible bond is not affected by the value of the firm's underlying common stock.
E) A distinction of convertible bonds is that the conversion privilege can be separated from the bond and sold by the owner.
Correct Answer:
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