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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Definitions:

Prisons

Facilities where individuals convicted of crimes are held as part of their punishment and rehabilitation process.

Asylums

historically refers to institutions created for the care of individuals with mental illnesses, though practices and conditions varied widely.

Forced Labor

Work that people are compelled to do against their will under threat of punishment.