A convertible bond currently sells for $1,125, has a $1,000 face value, pays interest annually, and matures in six years. The bond is convertible into shares of common stock at a conversion price of $20. How many shares of stock will be received if five bonds are converted?

Question

Quizplus · Accepted Answer

To find the number of shares received upon conversion, divide the bond's face value by the conversion price. For one bond, $1,000 / $20 = 50 shares. For five bonds, 50 shares/bond * 5 bonds = 250 shares.

A Convertible Bond Currently Sells for $1,125, Has a $1,000