An investor in a 5% $1000 convertible bond, convertible at $50 to a currently valued stock of $30, paying a 5% cash dividend yield will likely receive _____ in income next year?

Question

Quizplus · Accepted Answer

The investor will receive $50 in interest from the bond, as it is a 5% bond on a $1000 principal. The conversion option is not exercised because the stock is valued at $30, which is below the conversion price of $50, so dividends are not applicable.

An Investor in a 5% $1000 Convertible Bond, Convertible at $50