When the market price of the common stock exceeds the conversion price, the conversion (or stock) value exceeds the par value of the convertible security.

Question

Quizplus · Accepted Answer

When the market price of the common stock exceeds the conversion price, the conversion value of the convertible security will be higher than its par value. This is because the investor would be able to convert the security into common stock at a lower price than the market price of that stock. Thus the conversion value of the convertible security would exceed its par value.

When the Market Price of the Common Stock Exceeds the Conversion