A 45%, Semiannual Coupon Bond Has a Face Value of $1,000

question 63

Multiple Choice

A 4.5%, semiannual coupon bond has a face value of $1,000 and a time to maturity of 4 years. The bonds are convertible into shares of common stock at a conversion price of $42.50. The stock price currently is $40.70. Similar, non-convertible bonds have a yield to maturity of 5.6%. The intrinsic value of this bond is ________ and the conversion value is ________.

• A)$832.62; $982.80
• B)$961.06; $957.65
• C)$1,014.16; $1,017.50
• D)$1,014.16; $982.80
• E)$1,006.96; $1,017.50

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Definitions:

Direct Labor

The cost of wages for labor directly involved in the production of goods or delivery of services.

Inventoriable

Costs or goods that are considered inventory and can be accounted for as assets until they are sold or used.

Period Costs

Expenses that are not directly tied to the production of goods, such as sales, administration, and other overhead costs.

Factory Insurance

A type of insurance policy that provides coverage against losses or damages to a manufacturing facility and its operations.