If a $1,000 Convertible Bond Has a Conversion Ratio of 50

question 22

Multiple Choice

If a $1,000 convertible bond has a conversion ratio of 50 and the firm's equity is currently selling for $22 per share, then the:

• A) bond should trade for $900.
• B) bond should trade for $1,000.
• C) bond should trade for $1,100.
• D)firm will have already converted the bond.

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Definitions:

Service Cost

The actuarial present value of benefits earned by employees during a given period, included in the calculation of pension expense.

Actuarial Present Value

A calculation used to determine the present value of a future series of payments or receipts, taking into account variables such as mortality, investment earnings, and expense risks.

Net Periodic Pension Cost

The net periodic pension cost is the total expense recognized in a period related to an employer's pension plan, including service costs, interest costs, expected returns on plan assets, and any amortizations.