The holders of Mikayla Corporation's bond with a face value of $1,000 can exchange that bond for 30 shares of stock. The stock is selling for $25.00. What is the conversion value of the bond?
A) $25
B) $40
C) $750
D) $1,000
E) No conversion premium is given.

Question

Quizplus · Accepted Answer

The conversion value of the bond is the value of the stock that the bond can be converted into. Each bond can be converted into 30 shares of stock, which is worth 30 x $25 = $750. Therefore, the conversion value of the bond is $750.

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