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

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

An analyst has recently informed you that at the issuance


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

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

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