In which of the following situations does the value of a convertible bond exceed the value of straight debt or equity by the greatest amount?

Question

Quizplus · Accepted Answer

When the share price is close to the conversion price, the convertible bond's value is maximized because it benefits from both the fixed income component (like straight debt) and the potential for conversion into equity at advantageous terms. This dual benefit is not as pronounced when the share price is significantly lower or higher than the conversion price.

In Which of the Following Situations Does the Value of a Convertible