A $1,000 par value convertible bond has a conversion ratio of 50. The bond conversion price is $20.

Question

Quizplus · Accepted Answer

The conversion ratio is the number of common shares that can be obtained by converting one bond. In this case, the conversion ratio is 50, which means that one bond can be converted into 50 shares of common stock. The conversion price is $20, which means that if the bond is converted, each share of stock obtained will have a value of $20. Therefore, the bond has a conversion value of $1,000/50 = $20 per share, which is equal to the conversion price. This confirms that the bond has a conversion ratio of 50 and a conversion price of $20.

A $1,000 Par Value Convertible Bond Has a Conversion Ratio