The price of a convertible bond increases when
1. interest rates rise
2. interest rates fall
3. the price of the stock rises
4. the price of the stock falls

Question

Quizplus · Accepted Answer

The price of a convertible bond typically increases when interest rates fall, as the bond's fixed income becomes more attractive relative to new bonds issued at the lower rates. Additionally, if the price of the underlying stock rises, the convertible feature becomes more valuable, as the conversion into stock would be at a profit.

The Price of a Convertible Bond Increases When