A $1,000 corporate bond is convertible to 40 shares of the corporation's common stock.What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?

Question

Quizplus · Accepted Answer

The minimum price that the stock must obtain before bondholders would consider converting the bond to stock is $25. This is because the bond is convertible to 40 shares of the corporation's common stock, so if the stock price is below $25, the bondholders would be better off keeping the bond.

A $1,000 Corporate Bond Is Convertible to 40 Shares of the Corporation's