medium · CFA Level I fixed-income
Meridian Pack is considering issuing a 'convertible' bond. When calculating the effective duration of a convertible bond that is 'deep in-the-money' (the conversion value is much higher than the par value), the effective duration will most closely resemble:
- Zero, because it is an equity-linked product.
- The duration of the underlying common stock.
- The duration of a straight bond of the same maturity.
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