A $1,000 Face Value 7% Convertible Bond Pays Interest Semi-Annually

question 406

Multiple Choice

A $1,000 face value 7% convertible bond pays interest semi-annually and has a maturity date of five years. The conversion price is $40. The market yield on nonconvertible debentures of comparable
Quality is 8%. The market price of the common stock is $38.50 currently. What is the minimum price
At which the convertible bond should sell?

• A) $948.26
• B) $959.44
• C) $962.50
• D) $1,000.00
• E) $1,037.50

---

Definitions:

Closed Group

A restricted group where membership is fixed from the beginning to the end of a group's lifespan, not allowing new members to join midway.

Efforts Rejected

The experience of having one's endeavors or contributions dismissed or not acknowledged by others.

Intranet Site

A private network accessible only to an organization's staff, often used to store, share, and manage internal information.

Two-Day Workshop

A short, intensive, educational program spread over two days, designed to teach or introduce practical skills, techniques, or ideas.