Brad owns a convertible bond. Which one of the following terms would apply to the value of this bond if he were to convert it into shares of stock today?

Question

Quizplus · Accepted Answer

When Brad converts his convertible bond into shares of stock, the value of the bond is referred to as the conversion value. This is the value of the bond if it were to be converted into shares at the current market price. The conversion premium is the amount by which the conversion price exceeds the current market price of the stock. The straight bond value is the value of the bond if it were not convertible. Inverted value and prescribed value are not relevant terms in relation to convertible bonds.

Brad Owns a Convertible Bond