What will likely happen in the case of a bond selling for $1,000 which can be converted to 20 shares of stock that are currently selling for $55 per share?

Question

Quizplus · Accepted Answer

If the bondholder converts the bond into 20 shares of stock, they will receive $1,100 worth of stock (20 shares x $55 per share). This is a better option than holding onto the bond, which is only worth $1,000. Therefore, the bondholder would likely choose to convert the bond to stock. None of the other options presented are likely outcomes.

What Will Likely Happen in the Case of a Bond