What Is the Value of a Convertible Bond with a Conversion

question 33

Multiple Choice

What is the value of a convertible bond with a conversion ratio of 25, face value of $1,000, coupon rate of 10%, and yield to maturity of 10%? Common stock of this firm is currently selling at $35.

• A) $875
• B) $1,000
• C) $1,125
• D)$1,875

---

Definitions:

Groupthink

A phenomenon that occurs within a group of people, in which the desire for harmony or conformity results in an irrational or dysfunctional decision-making outcome.

Deindividuation

A psychological state where an individual loses self-awareness and a sense of individuality, often leading to disinhibited or antinormative behavior, typically within a group context.

Group Polarization

The phenomenon where a group discussion leads members to adopt more extreme positions and viewpoints than they initially held.

Political Views

Opinions or beliefs about politics and government policies, which often influence voting behavior and attitudes toward political issues.