An income-oriented client holds a convertible bond that has just been called by the issuer for "forced conversion." The bond's conversion value is $1,400. If the client converts to common shares, how will their portfolio most likely be affected?

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Accepted Answer

The yield on the common shares is likely lower than the bond's coupon, leading to a decrease in the client's current income.

An income-oriented client holds a convertible bond that has just been called by the issuer for "forced conversion." The bond's conversion value is $1,400. If the client converts to common shares, how will their portfolio most likely be affected?

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