Based on empirical studies, firms tend to call convertible bonds when the conversion value is:
A) less than the conversion price.
B) greater than the straight bond value.
C) greater than the call price.
D) less than the face value.

Question

Quizplus · Accepted Answer

Firms tend to call convertible bonds when the conversion value is greater than the call price, as this incentivizes bondholders to convert their bonds into equity, allowing the firm to reduce debt.

Based on Empirical Studies, Firms Tend to Call Convertible Bonds