Based on empirical studies, firms tend to call convertible bonds when the conversion value is:
A)less than the conversion price.
B)greater than the straight bond value.
C)greater than the call price.
D)less than the face value.
E)None of the above.

Question

Quizplus · Accepted Answer

Firms tend to call convertible bonds when the conversion value is greater than the call price because it allows them to force conversion, reducing debt and avoiding paying higher interest rates.

Based on Empirical Studies, Firms Tend to Call Convertible Bonds