The Market Value of a Convertible Bond Will Exceed the Conversion

question 120

Multiple Choice

The market value of a convertible bond will exceed the conversion value or straight bond value, whichever is greater, by an amount called the market premium. This premium exists because

• A) buyers and sellers do not usually agree on the conversion value.
• B) markets are efficient.
• C) purchasers expect future stock price movements to be positive.
• D) the straight bond value is close to the conversion value.

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