Why Should a Convertible Bond Always Be Valued at More

question 86

Multiple Choice

Why should a convertible bond always be valued at more than its bond value or its conversion value up until maturity?

• A) The bond holder is receiving higher interest rates.
• B) The conversion value does not have an upper bound.
• C) The conversion ratio may be decreased.
• D)The bond does not have to be given up to exercise the option.

---

Definitions:

Semi-

A prefix meaning half or partially, often used to indicate that something is incomplete or limited.

Semilunar

Shaped like a half-moon or crescent; often used to describe certain valves or cartilages in the human body that have a crescent shape.

Half

Refers to one of two equal parts into which something is or can be divided.

Centi-

A prefix denoting a factor of one hundredth (1/100) in the metric system.