What would likely happen to the price of your convertible bond if the underlying stock declines?

When the underlying stock of a convertible bond declines, the price of the convertible bond itself would typically decline as well, but generally not to the same extent as the stock. This is because convertible bonds have a certain level of protection as they provide fixed interest payments and the potential for conversion into equity, which gives them some intrinsic value even when the stock price is falling.

Convertible bonds are hybrid securities that possess characteristics of both debt and equity. When the stock price decreases, the equity conversion feature becomes less valuable; however, the bond's fixed income component and its priority over equity in the capital structure help maintain its value.

Thus, the price of your bond would decline less than the stock—reflecting its embedded bond features while still being impacted by shifts in the underlying stock price. This relationship illustrates how convertible bonds, while affected by the performance of the underlying stock, tend to offer more resilience in adverse market conditions compared to the stock itself.