A convertible bond is currently selling for $1,125. It is convertible into 20 shares of common which presently sell for $40 per share. The conversion premium is:
A) $325.
B) $215.
C) 66.74 shares.
D) 23.80 shares. $40 stock price *20 shares = $800 conversion value
Conversion premium = Bond price of $1,125 - Conversion value of $800 = $325.
Correct Answer:
Verified
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