Question
The holders of a convertible bond with $1,000 par-value and 5% coupon-rate can exchange that bond for 35 shares of stock. Market interest rate for
The holders of a convertible bond with $1,000 par-value and 5% coupon-rate can exchange that bond for 35 shares of stock. Market interest rate for corporate borrowing is 5% and the stock of the company is currently selling for $25. All else equal, which of the following will mostly likely increase the value (i.e., market price) of this convertible bond?
A) The coupon rate of this bond is adjusted down slightly.
B) The market interest rate for corporate borrowing decreases slightly.
C) The conversion price of this bond is adjusted up slightly.
D) The market price of the company's stock falls slightly.
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