Which of the following is true regarding convertible bonds?
A)The convertible bond value is unrelated to the value of the stock.
B)The value of convertible debt is a function of the risk of default.
C)The conversion factor can be separated from the bond and sold separately to other investors.
D)When a bond is converted into shares, the company receives additional funds as part of the conversion.

Question

Quizplus · Accepted Answer

The value of convertible debt is influenced by the risk of default, similar to traditional bonds. This is because the bond component of a convertible bond is still a debt obligation of the company, and its value will be affected by the company's creditworthiness and the likelihood of default.

Which of the Following Is True Regarding Convertible Bonds