Jana owns preferred stock from High Brow Cow Dairy Farms, makers of the finest dairy products. The stock has a par value of $1,250 and a conversion ratio of 25. The stock is currently convertible. The firm's common stock is selling for $57 per share. If Jana converts the preferred stock, what would be the conversion value?
A) $1,250
B) $31,250
C) $2,850
D) $1,425

Question

Quizplus · Accepted Answer

The conversion value can be calculated by multiplying the current price of the common stock by the conversion ratio. Here, it's $57 per share * 25 = $1,425.

Jana Owns Preferred Stock from High Brow Cow Dairy Farms