A Bond Has a Conversion Ratio of 24 and a Market

question 81

Multiple Choice

A bond has a conversion ratio of 24 and a market price of $1,080. If the par value is $1,000, what is the conversion price?

• A)$40.00
• B)$41.67
• C)$42.60
• D)$43.20
• E)$43.80

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Definitions:

Stated Interest Rate

This refers to the nominal or advertised interest rate on a loan or financial product, not accounting for compounding or fees.

Trade Credit

A type of commercial financing where a buyer is allowed to purchase goods or services and pay the supplier at a later scheduled date.

Accounts Payable Balance

Accounts payable balance represents the total amount a company owes to its suppliers or creditors for purchases made on credit.

Costly Trade Credit

Refers to the higher cost associated with buying goods or services on credit, when compared to paying cash upfront, due to interest or fees imposed by the seller.