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 premium?
A)0.00%
B)29.86%
C)59.01%
D)106.61%
E)None of the above.

Question

Quizplus · Accepted Answer

The conversion value is 35 shares * $22 = $770. The conversion premium is calculated as (Bond face value - Conversion value) / Conversion value = ($1,000 - $770) / $770 = 29.86%.

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