Question: An analyst has informed you that at the issuance of a companys convertible bonds, one of the two following sets of relationships existed: Assume the

An analyst has informed you that at the issuance of a company€™s convertible bonds, one of the two following sets of relationships existed:

Scenario A Scenario B Face value of bond Straight value of convertible

Assume the bonds are available for immediate conversion. Which of the two scenarios do you believe is more likely? Why?

Scenario A Scenario B Face value of bond Straight value of convertible bond $1,000 900 Market value of convertible bond1,000 $1,000 950 900

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