If the underlying common stock declines to the point where there is no advantage to convert the bonds into common stock, the bonds will sell at a price based on their inherent value as bonds, regardless of the convertible feature. A bond is convertible to common stock at $20 per share.
The holder has the right to sell these bonds back to the issuer if the bonds don't perform well. b. The holder can convert these bonds into an equal number of new bonds if they choose to do so.
A. Coupon rates are usually higher than nonconvertible bond rates of the same issuer. B. Convertible bondholders are creditors of the corporation. issuer.
If called, the owners have the option of retaining the bonds and will continue to receive interest. II. After the date it is called, interest will cease to be paid. III.