Generally, once a convertible bond trades at a certain premium to its intrinsic value, or at a certain multiple of its conversion price, the bond must be converted into common stock.

Question

Quizplus · Accepted Answer

There is no hard and fast rule for when a convertible bond must be converted into common stock. It depends on the terms of the bond and the discretion of the bondholder. However, a large premium or multiple may incentivize the bondholder to convert in order to capture the value of the underlying stock.

Generally, Once a Convertible Bond Trades at a Certain Premium