A 10% convertible bond has a conversion ratio of 25.The firm's common stock is currently selling at $35.If the bond is about to mature,what is its value?
A) $875
B) $1,000
C) $1,125
D) $1,875

Name: A 10% convertible bond has a conversion ratio of 25.The firm's common stock is currently selling at $35.If the bond is about to mature,what is its value? A) $875 B) $1,000 C) $1,125 D) $1,875
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Question

Quizplus · Accepted Answer

Conversion value = 25 × $35 = $875. Investors will prefer to let the bond mature and receive $1,000.

A 10% Convertible Bond Has a Conversion Ratio of 25