The holders of Xenron Corporation's bond with a face value of $1,000 can exchange that bond for 35 shares of stock. The stock is selling for $22.00. What is the conversion value of the bond?
A) $25
B) $40
C) $770
D) $1,000
E) No conversion premium is given.

Question

Quizplus · Accepted Answer

To find the conversion value, we need to multiply the number of shares received upon conversion (35) by the current price of the stock ($22). Conversion value = 35 x $22 = $770. This means that the bond has a conversion premium of $770 over its face value of $1,000, making the total value of the convertible bond $1,770. Therefore, the correct answer is choice C.

The Holders of Xenron Corporation's Bond with a Face Value