When a company issues convertible bonds with a $1,000 par value that can be converted to 10 shares of common stock, each bond includes

Question

Quizplus · Accepted Answer

The convertible bonds can be converted into 10 shares of common stock, which means there is a call option attached with an exercise price of $100 per share. This allows the bondholder to convert the bond into common shares at a predetermined price ($100 per share) if they choose to do so. There is no put option attached to the convertible bond.

When a Company Issues Convertible Bonds with a $1,000 Par