At the time of issuance, the issuer of a convertible security normally establishes a conversion price ________ the current market price of the firm's stock.

Question

Quizplus · Accepted Answer

The issuer of a convertible security normally establishes a conversion price above the current market price of the firm's stock to provide investors an incentive to convert their bonds into stock. This allows the issuer to issue debt at a lower interest rate than non-convertible debt.

At the Time of Issuance, the Issuer of a Convertible