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:

Retained Earnings

Accumulated net income that has been retained by a company rather than distributed to its owners as dividends.

Shareholders

Individuals or entities that own shares in a corporation, giving them ownership interest in the company.

Cost Method

An accounting method used to record investments, where the investment is recorded at its acquisition cost without adjusting for changes in market value.

Investment Account

An Investment Account is a financial account held by an investor with a brokerage firm, bank, or custodian that holds securities and other investments.