Hi Can anyone explain the below:
Convertible Bond:
Issue Price: $1000
Initial Conversion Price: $10
Threshold Div: $0.50/share
Common stock at issue date 15 sept: $8.70
Common Stock at 17 sep: $9.10
Analyst expects dividend to be $0.70/share. If the actual dividend ends up being $0.70 per share, the conversion price will:
A. be adjusted downward
B. not be adjusted
C. be adjusted upward
Answer is A.