A Convertible Bond Has a Par Value of $1,000 and a Current

question 1

Multiple Choice

A convertible bond has a par value of $1,000 and a current market value of $950.The current price of the issuing firm's stock is $22 and the conversion ratio is 40 shares.The bond's conversion premium is _________.

• A)$40
• B)$70
• C)$190
• D)$200
• E)none of the above

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Definitions:

Stated Interest Rate

The interest rate declared on a bond or loan agreement, not necessarily reflecting the market interest rate or effective interest rate.

Present Value

The current worth of a future sum of money or stream of cash flows, discounted at a specific rate.

Actuarial Information

Data and calculations used by actuaries to assess risks and determine premiums or forecasts for insurance and other industries.

Bond Issuance

The process by which a borrower issues bonds to lenders or investors in order to raise capital, involving agreements to repay the borrowed amount plus interest.