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

question 27

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 $42 per share.What is the conversion value of this bond?

• A)$1,680
• B)$2,575
• C)$2,625
• D)$4,651
• E)$5,000

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Definitions:

Unpleasant Emotions

Feelings that are often considered negative and undesirable, such as sadness, anger, fear, or frustration.

Destructive

Causing great and irreparable harm or damage.

Defense Mechanisms

Psychological strategies used by individuals unconsciously to protect themselves from anxiety arising from unacceptable thoughts or feelings.

Repression

A defense mechanism in psychoanalytic theory where distressing thoughts and memories are unconsciously pushed out of conscious awareness.