The holders of Xenron Corporation's bond with a face value of €1,000 can exchange that bond for 35 shares of equity.The equity is selling for €22.00.What would the conversion price and
Conversion ratio be if Xenron had a 3 for 1 equity split?
A)€ 7.33; 75
B)€ 9.52; 105
C)€22.00; 25
D)€28.57; 35
E)None of the above.

Question

Quizplus · Accepted Answer

Before the equity split, the conversion price would be €1,000/35 = €28.57, and the conversion ratio would be 1/€28.57 = 0.035 shares per euro. 
After the 3 for 1 equity split, the number of shares would triple to 105, while the price per share would drop to €22.00/3 = €7.33. 
Therefore, the new conversion price would be €1,000/105 = €9.52, and the new conversion ratio would be 1/€9.52 = 0.105 shares per euro.

The Holders of Xenron Corporation's Bond with a Face Value