The bonds of VDM, Inc. are convertible into shares of the ﬁrm's common stock at $50 per share. The current price of the common stock is $45 per share. The bonds have a $1,000 par value and
Currently sell for $950 apiece. When the bonds were issued, the market price of the common stock
Was $40. Thus, what was the conversion premium at issuance?
A) 10%
B) 11%
C) 20%
D) 25%
E) 33%

Question

Quizplus · Accepted Answer

The Answer of The bonds of VDM, Inc. are convertible into shares of the ﬁrm's common stock at $50 per share. The current price of the common stock is $45 per share. The bonds have a $1,000 par value and
Currently sell for $950 apiece. When the bonds were issued, the market price of the common stock
Was $40. Thus, what was the conversion premium at issuance?
A) 10%
B) 11%
C) 20%
D) 25%
E) 33%

The Bonds of VDM, Inc