Kurt Owns a Convertible Bond That Matures in Three Years

question 116

Multiple Choice

Kurt owns a convertible bond that matures in three years. The bond has an 8 percent coupon and pays interest annually. The face value of the bond is $1,000 and the conversion price is $16.67.
Similar bonds have a market return of 9 percent. The current price of the stock is $17.50. What is the
Conversion value of this bond?

• A) $952.57
• B) $974.69
• C) $1,038.30
• D) $1,049.79
• E) $1,144.27

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Definitions:

Process Innovation

The implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment, and/or software.

Reverse Innovation

An innovation seen first, or likely to be used first, in the developing world before spreading to industrialized nations.

Outsourced

The act of hiring external organizations or individuals to perform tasks, handle operations, or provide services that are either difficult to manage or are outside of the business's core competencies.

Sustainable Business

An enterprise that operates in a way that preserves or enhances economic opportunity, environmental health, and social equity for current and future generations.