Because a security is first sold with a conversion price above the current market price of the firm's stock, conversion is initially not attractive.

Question

Quizplus · Accepted Answer

This statement is true. When a security is first sold with a conversion price above the current market price of the firm's stock, the conversion feature is not immediately attractive to investors. They would be more likely to exercise the conversion option if the stock price rises above the conversion price at some point in the future.

Because a Security Is First Sold with a Conversion Price