Herring Inc

question 26

Multiple Choice

Herring Inc. is considering issuing 15-year, 8% semiannual coupon, $1,000 face value convertible bonds at a price of $1,000 each. Each bond would be convertible into 25 shares of common stock. If the bonds were not convertible, investors would require an annual nominal yield of 10%. What is the straight-debt value of the bond at the time of issue?

• A) $725.58
• B) $763.76
• C) $803.96
• D) $846.28
• E) $888.59

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Definitions:

Strict-liability

A legal doctrine in tort law that holds a party responsible for their actions or products, without the need to prove negligence or fault.

Inherently Dangerous

Activities or items possessing potential for significant harm due to their nature.

Unreasonable Risk

A level of danger that exceeds what is considered acceptable or appropriate under given circumstances.

Negligent

Failing to take proper care in doing something, leading to damage or harm to others.