A Sorsi bond has a par value of $1,000 but is currently selling for $920. If the bond has a conversion ratio of 23, what is the conversion price? Current stock price is $30.
A) $40.00
B) $43.48
C) $33.33
D) $30.67

Question

Quizplus · Accepted Answer

The conversion price can be calculated using the formula:

Conversion price = Par value / Conversion ratio

In this case, the par value is $1,000 and the conversion ratio is 23:

Conversion price = 1000 / 23 = $43.48

Since the current stock price is $30 and the conversion price is higher than the current stock price, it is not advantageous for the investor to convert the bond into stock. Therefore, the bond will most likely be held until maturity, or until the stock price increases.

A Sorsi Bond Has a Par Value of $1,000 but Is