When the market price of a common stock rises above the conversion price, the convertible bond should always be converted immediately before it drops.

Question

Quizplus · Accepted Answer

While it may be tempting to immediately convert the convertible bond when the market price of the common stock exceeds the conversion price, it is not always the best decision. Factors such as the remaining time until maturity of the bond, the potential for further increases in the stock price, and the coupon rate on the bond should also be considered before making a decision to convert.

When the Market Price of a Common Stock Rises Above