Convertible bonds give the investor the option to acquire the firm's stock in exchange for the value of the underlying bond.

Question

Quizplus · Accepted Answer

Convertible bonds have an embedded option that allows the bondholder to convert the bond into a specified number of shares of the issuer's common stock. This option provides the bondholder with the right to benefit from any upside potential in the stock price while still retaining the security of the bond's fixed-income stream.

Convertible Bonds Give the Investor the Option to Acquire the Firm's