Moniker Manufacturing's bonds were recently issued at their $1,000 par value.At any time prior to maturity (20 years from now),a bondholder can exchange a bond for a share of common stock at a conversion price of $40.What is the conversion ratio?

Question

Quizplus · Accepted Answer

The conversion ratio is the number of shares of common stock the bondholder can receive upon conversion. It is calculated by dividing the par value of the bond ($1,000) by the conversion price ($40).

$1,000 / $40 = 25

Therefore, the conversion ratio is 25.

Moniker Manufacturing's Bonds Were Recently Issued at Their $1,000 Par