When a company's common stock rises in price, its convertible bonds also tend to rise in price.

Question

Quizplus · Accepted Answer

Convertible bonds are financial instruments that can be converted into a predetermined number of the company's common stock, typically at the discretion of the bondholder. Therefore, when the price of the company's common stock rises, the value of the option to convert the bond into stock also increases, making the convertible bonds more attractive to investors and thus, tend to rise in price.

When a Company's Common Stock Rises in Price, Its Convertible