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A Conversion Feature in a Bond Has a Greater Chance

question 160

True/False

A conversion feature in a bond has a greater chance of being exercised (to the detriment of the bondholder) if market interest rates have risen since the bond was issued.


Definitions:

Marginal Cost

The hike in overall cost that comes with the assembly of an extra unit of a product or service.

Elasticity

A measure in economics to show how much the quantity demanded or supplied of a good responds to a change in price or other factors.

Marginal Cost

The cost incurred by producing an additional unit of a product or service.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in one of its determinants, such as its price.

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