A 6% Convertible Bond Has a Face Value of $1,000

question 46

Multiple Choice

A 6% convertible bond has a face value of $1,000 and a 6-year maturity. The conversion ratio is 13. Nonconvertible bonds with comparable risk are yielding 7%. The common stock is selling at $76 a share. What is the value of the conversion premium?

• A) 3.59%
• B) 3.61%
• C) 3.68%
• D) 3.75%
• E) 3.83%

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