A 6% Convertible Bond Has a Face Value of $1,000

question 101

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:

Specific Abilities

Distinct skills or competencies in narrowly defined areas, contrasting with general intelligence.

Multiple Intelligences

A theory proposed by Howard Gardner, suggesting that intelligence is not a single entity, but a combination of different types of intelligences including linguistic, logical-mathematical, and spatial, among others.

Gardner

Refers to Howard Gardner, a developmental psychologist known for his theory of multiple intelligences, which suggests that people have different kinds of intelligences.

Sternberg

An American psychologist named Robert Sternberg, known for his theory on the triarchic theory of intelligence.