The holders of Xenron Corporation's bond with a face value of $1,000 can exchange that bond for 35 shares of stock. The stock is selling for $22.00.
-Refer to the above scenario.What is the conversion price?
A)$22.00
B)$28.57
C)$35.00
D)$1,000.00
E)No conversion premium is given.

Question

Quizplus · Accepted Answer

The conversion price is the ratio of the face value of the bond to the number of shares received upon conversion. In this case, the face value of the bond is $1,000 and the bond can be exchanged for 35 shares of stock, which would cost 35 x $22 = $770. Therefore, the conversion price is $1,000/35 = $28.57.

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