In convertible bonds,the value of the common stock price upon immediate conversion is the
A) Put-call parity price.
B) Conversion parity price.
C) Cash equivalent price.
D) Convertible price.
E) Redemption price.

Question

Quizplus · Accepted Answer

The value of the common stock price upon immediate conversion is known as the conversion parity price. This is the price at which the convertible bond can be converted into common stock. It is determined by dividing the market value of the convertible bond by the conversion ratio. It represents the minimum value of the underlying common stock that the investor would receive upon conversion, assuming no transaction costs. Therefore, the correct option is B.

In Convertible Bonds,the Value of the Common Stock Price Upon