You are a financial advisor and one of your clients comes to you with a convertible bond

Question:

You are a financial advisor and one of your clients comes to you with a convertible bond that has a rate of 8 percent. The market interest rate is 6 percent. The share price of the company that issued the bond is going down, and you don’t expect the company to recover in the near future. Your client is thinking of converting the bond into shares and wants your advice. What will you recommend to your client?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...