A step-up in the conversion price refers to
A) the ability of the company to step up the maturity of the bond to an earlier date.
B) the provision that decreases the conversion ratio the longer a convertible bond is held.
C) a refunding of a convertible bond when the conversion value equals the pure bond value.
D) none of these options are true.

Question

Quizplus · Accepted Answer

A step-up in the conversion price typically refers to the provision that increases the conversion price (and therefore decreases the conversion ratio) the longer a convertible bond is held. This is often seen as a protective measure for the issuer, as it discourages bondholders from converting the bonds too soon and potentially diluting the company's ownership. Options A and C refer to different aspects of convertible bond terms, and are not related to a step-up in the conversion price. Option D is incorrect as there is a correct answer.

A Step-Up in the Conversion Price Refers to