Which of the following best defines a conversion ratio?
A) An option that can be exercised at any time until its expiration date.
B) The right to buy an asset at a fixed price during a particular period of time.
C) The dollar amount of a bond's par value that is exchangeable for one share of stock.
D) The number of shares per bond received for conversion into stock.
E) The value of a convertible bond if it was immediately converted into common stock.

Question

Quizplus · Accepted Answer

The conversion ratio is defined as the number of shares of stock that a holder can obtain by converting a convertible security, such as a convertible bond or preferred stock, into common stock. This ratio determines how many shares a bondholder or shareholder will receive upon conversion, making option D the correct definition.

Which of the Following Best Defines a Conversion Ratio