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.

---

Definitions:

Amendment

A modification, change, or addition to a legal document or statute.

Cy Pres Doctrine

A legal principle that allows a court to amend the terms of a charitable trust or gift if its original purpose becomes impossible or impracticable to achieve.

Settlor

A person who creates a trust. Also called trustor.

Charitable Purposes

Activities undertaken with the aim of providing relief to the poor, advancing education, or other acts benefiting the community without profit motive.