A bond has a par value of $1,000, a market value of $900, a conversion price of $45, and an associated stock price of $40. The premium over conversion value is

Question

Quizplus · Accepted Answer

The conversion value of the bond is calculated by dividing the par value by the conversion price and then multiplying by the stock price: ($1,000 / $45) * $40 = $888.89. The premium over conversion value is the difference between the market value of the bond and its conversion value: $900 - $888.89 = $11.11.

A Bond Has a Par Value of $1,000, a Market