A convertible bond is currently selling for $900.It is convertible into 15 common shares which presently sell for $55 per share.The conversion premium is:

Question

Quizplus · Accepted Answer

The conversion premium is the amount by which the convertible bond's price exceeds the current market value of the underlying common shares.

To calculate the conversion premium, we need to determine the current market value of the 15 common shares, which is simply 15 x $55 = $825.

We can then subtract this value from the price of the convertible bond:

$900 - $825 = $75

Therefore, the conversion premium is $75. Answer choice B is correct.

A Convertible Bond Is Currently Selling for $900