B & O Railroad's convertible debentures were issued at their $1,000 par value in 2008.At any time prior to maturity on February 1,2028,a debenture holder can exchange a bond for 25 shares of common stock.What is the conversion price,P_c? A) $25 B) $1,000 C) $40 D) $1,025 E) $50

Question

Quizplus · Accepted Answer

The conversion price is the price at which a debenture holder can exchange a bond for shares of common stock. To calculate it, we need to divide the face value of the debenture by the number of shares it can be exchanged for.

In this case, the face value of the debenture is $1,000 and it can be exchanged for 25 shares of common stock. Therefore, the conversion price is:

$1,000 / 25 shares = $40 per share

Therefore, the answer is C, $40.

B & O Railroad's Convertible Debentures Were Issued at Their