What Is the Value of a Convertible Bond with a Conversion

question 80

Multiple Choice

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

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

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Definitions:

Level Of Significance

The probability of rejecting the null hypothesis in a statistical test when it is actually true; a threshold for determining the statistical significance.

Rejection Region

The range of values for which we reject the null hypothesis in hypothesis testing.

Level Of Significance

A threshold used in hypothesis testing, below which the null hypothesis is rejected.

Confidence Interval

A gamut of values, taken from sample statistics, considered likely to include the value of a hidden population attribute.