The Bonds of VDM, Inc

question 339

Multiple Choice

The bonds of VDM, Inc. are convertible into shares of the firm's common stock at $50 per share. The current price of the common stock is $45 per share. The bonds have a $1,000 par value and currently sell for $950 apiece. When the bonds were issued, the market price of the common stock was $40. Thus, what was the conversion premium at issuance?

• A) 10%
• B) 11%
• C) 20%
• D) 25%
• E) 33%

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Definitions:

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To extend outward or protrude from a flat base or background, often used in sculpture or architectural details.

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Small statues created by the ancient Sumerians, often representing worshippers offering prayers or gifts to a deity.

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