You Own One Convertible Bond with a Face Value of $1,000

question 383

Multiple Choice

You own one convertible bond with a face value of $1,000. The bond can be converted into 8.889 shares of Alpha stock. This bond is currently selling for $1,063. What is the conversion price?

• A) $87.50
• B) $96.08
• C) $104.50
• D) $112.50
• E) $119.59

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Definitions:

Maturity Date

the specific date on which a financial instrument, such as a loan or bond, reaches its expiration and the principal is due to be repaid.

Promissory Note

A financial instrument containing a written promise by one party to pay another a definite sum of money either on demand or at a specified future date.

Negotiable

Capable of being transferred or assigned from one party to another, often used in the context of financial instruments.

Nonexistent Person

A fictional or imagined individual who does not exist in reality.