If a $1,000 Convertible Bond with a Market Value of $950

question 91

Multiple Choice

If a $1,000 convertible bond with a market value of $950 has a conversion ratio of 25 when the firm's stock is selling for $36 per share, then:

• A)The bond will be converted immediately
• B)The bond is violating its "price floor"
• C)Conversion now would give the investor a profit of $900
• D)The conversion value of the bond is $900

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Definitions:

Cover

To obtain substitute or equivalent goods.

Obsolete

No longer produced or used; out of date.

Bushels of Wheat

A measurement unit for volume, commonly used in agriculture, representing the quantity of wheat.

Market Price

The current price at which an asset or service can be bought or sold in a given market.