- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 8. Valuation and Analysis of Convertible Bonds
CFA Practice Question
A busted convertible exhibits mostly ______ risk-return characteristics.
B. stock
C. hybrid
A. bond
B. stock
C. hybrid
Correct Answer: A
The stock is trading well below its conversion value. The result is that the convertible bond is valued as regular debt because there is very little chance that it will ever reach the convertible price before maturity.
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