What Happens in the Case of a Bond Selling for $1,000

question 53

Multiple Choice

What happens in the case of a bond selling for $1,000 that can be converted to 20 shares of stock that are currently selling for $80 per share?

• A) The bondholder will lose $100.
• B) The stock will go down to $50 per share.
• C) The bond's price will go down to $900.
• D) The bondholder will choose to convert.

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Definitions:

Minimum Tax Exemption

An amount exempt from alternative minimum tax (AMT), designed to ensure that taxpayers with substantial income pay at least a minimum amount of tax.

Book Income

The income calculated for accounting purposes, rather than for tax purposes, often used to measure a company's financial performance.

Taxable Income

The amount of income used to determine how much tax an individual or a corporation owes to the government.

Federal Income Tax

A charge imposed by the IRS on the yearly income of individuals, corporations, trusts, and various legal bodies.