All of the following are normal characteristics of a convertible bond, EXCEPT
A) conversion at the option of the issuer.
B) conversion into a fixed number of shares of common stock.
C) a conversion price initially above the market price of the common stock.
D) an interest rate lower than that on straight debentures.
E) subordination.

Question

Quizplus · Accepted Answer

Conversion at the option of the issuer is not a normal characteristic of a convertible bond. It is usually at the option of the bondholder, not the issuer. The other characteristics listed, such as conversion into a fixed number of shares of common stock, a conversion price initially above the market price of the common stock, an interest rate lower than that on straight debentures, and subordination, are all commonly associated with convertible bonds.

All of the Following Are Normal Characteristics of a Convertible