A firm has an outstanding bond with a $1,000 par value that is convertible at $40 per share of common stock. The bond's conversion ratio is ________.
A) 20
B) 25
C) 40
D) 50

Question

Quizplus · Accepted Answer

The conversion ratio is calculated by dividing the par value of the bond ($1,000) by the conversion price per share ($40), which equals 25. Therefore, the conversion ratio is 25 shares of common stock per bond.

A Firm Has an Outstanding Bond with a $1,000 Par