When are convertibles in double jeopardy?

Question

Quizplus · Accepted Answer

Convertibles are in double jeopardy when the interest rates are high and when stock prices are low. This is due to both the underlying stock and interest rates causing variations in the price of the convertibles. These two events often triggers the sinking fund provision and are often called by corporations to force bondholders to convert to common stock. The true benefit to these holdings is the safety of debt with the potential for capital gains; however, these bonds will increase (decrease) in value as the underlying stock increases (decrease)..37

When Are Convertibles in Double Jeopardy