A firm has an outstanding bond with a $1,000 par value that is convertible at $40 per share of common stock. If the current market value of common stock per share is $45, the conversion value of the bond is _____________.

Question

Quizplus · Accepted Answer

The conversion value of the bond is calculated as the number of shares that can be obtained by converting the bond multiplied by the current market price of the stock. In this case, the conversion value is $1,000 / $40 * $45 = $1,125.

A Firm Has an Outstanding Bond with a $1,000 Par