A convertible bond is deep in the money. This means the bond price will closely track the ________.

Question

Quizplus · Accepted Answer

When a convertible bond is deep in the money, it means the market price of the underlying stock is significantly higher than the conversion price. As a result, the conversion value becomes the dominant factor in determining the bond price. Therefore, the bond price will closely track the conversion value of the bond, which is the value derived from assuming that the bond is converted into shares of the underlying stock.

A Convertible Bond Is Deep in the Money