The holders of Xenron Corporation's bond with a face value of $1,000 can exchange that bond for 35 shares of stock. The stock is selling for $22.00. What would the conversion price and conversion ratio be if Xenron had a 3 for 1 stock split?
A) $22; 25
B) $28.57; 35
C) $9.52; 105
D) $7.33; 75

Question

Quizplus · Accepted Answer

After a 3 for 1 stock split, each bond can be converted into 3 times as many shares, making it 35 shares * 3 = 105 shares. The conversion price adjusts inversely to the split, so the new conversion price is $1000 / 105 = $9.52.

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