A Convertible Bond Has a Face Value of $5,000 and a Conversion

question 6

Multiple Choice

A convertible bond has a face value of $5,000 and a conversion price of $80. The bond has a 6 percent coupon, pays interest semi-annually, and matures in 12 years. Similar bonds are yielding 7.5 percent. The current price of the stock is $41.20 per share. What is the conversion value of this bond?

• A)$1,680
• B)$2,415
• C)$2,575
• D)$4,651
• E)$5,000

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Definitions:

Peristalsis

The rhythmic contractions of smooth muscles in the gastrointestinal tract that facilitate the movement of food and waste.

Lamina Propria

Layer of connective tissue underlying the epithelium of a mucous membrane.

Serosa

Outermost covering of an organ or a structure that lies in a body cavity.

Lysozyme

Enzyme that is destructive to the cell walls of certain bacteria; present in tears and some other fluids of the body.