You own six convertible bonds. These bonds have a 5 percent coupon, a $1,000 face value and mature in 8 years. The bonds are convertible into shares of common stock at a conversion price of $20. How many shares of stock will you receive if you convert all of your bonds?

Question

Quizplus · Accepted Answer

To find out how many shares you will receive upon conversion, you divide the bond's face value by the conversion price. For one bond, this is $1,000 / $20 = 50 shares. Since you have six bonds, you multiply 50 shares by 6 to get 300 shares in total.

You Own Six Convertible Bonds