The holders of Mikayla Corporation's bond with a face value of $1,000 can exchange that bond for 30 shares of stock. The stock is selling for $25.00.
-Refer to the above scenario.What is the conversion premium?
A)10.00%
B)27.58%
C)33.32%
D)103.23%
E)None of the above.

Question

Quizplus · Accepted Answer

The conversion premium is calculated as follows:Conversion premium = [(Market price of stock x Number of shares received) - Face value of bond] / Face value of bond= [($25.00 x 30) - $1,000] / $1,000= $33.32%

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