Nowell Co. issued $1,000 par value bonds with a 4.5% coupon rate, convertible into 30 shares of Nowell common stock. When the bonds were issued the stock traded at $25 per share. The stock is now at $23 per share and pays a $0.10 per share annual dividend. The bonds are now trading at $992. In the near future

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Given the current stock price ($23 per share) is less than the conversion value of the bonds (30 shares * $23 = $690, which is less than the bond's par value of $1,000), bondholders have no incentive to convert their bonds into stock. Additionally, with the bonds trading slightly below par at $992, the issuing company has little incentive to call the bonds, as they are not significantly above par value to warrant a call to save on interest expenses.

Nowell Co Issued $1,000 Par Value Bonds with a 4