A Convertible Bond Has a Face Value of $1,000 and a Conversion

question 372

Multiple Choice

A convertible bond has a face value of $1,000 and a conversion price of $20. The bond has a 7 percent coupon and pays interest semi-annually. The bond matures in 8 years. Similar bonds are
Yielding 7.5 percent. The current price of the stock is $19.74. What is the straight bond value?

• A) $969.18
• B) $970.32
• C) $970.71
• D) $971.47
• E) $971.53

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Definitions:

Regional

Pertaining to or characteristic of a specific geographic area or division, often considered in terms of economic, political, or cultural distinctions.

Local Levels

Pertains to activities, governance, or administration executed at a community, town, or city scale, focusing on the immediate geographical area.

Diseconomies of Scale

A situation in which a firm experiences an increase in average costs due to an increase in its size or output level, often resulting from inefficiencies and higher per unit costs.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.