A convertible bond is a potentially dilutive security.

Name: A convertible bond is a potentially dilutive security.
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Question

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A convertible bond gives the holder the option to convert the bond into a predetermined amount of stock. If the bondholder chooses to convert, this could potentially increase the number of outstanding shares, leading to dilution of the existing shareholders' ownership percentage. Therefore, a convertible bond is considered a potentially dilutive security.

A Convertible Bond Is a Potentially Dilutive Security