Orient Airlines' Common Stock Currently Sells for $33,and Its 8

question 50

Multiple Choice

Orient Airlines' common stock currently sells for $33,and its 8% convertible debentures (issued at par,or $1,000) sell for $850.Each debenture can be converted into 25 shares of common stock at any time before 2022.What is the conversion value of the bond?

• A)$707.33
• B)$744.56
• C)$783.75
• D)$825.00
• E)$866.25

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Definitions:

Histograms

Graphical representations of the distribution of numerical data using bars of different heights to illustrate the frequencies of different values.

Leverage

The use of borrowed funds to increase the potential return of an investment or project.

Studentized Residuals

Residuals in a statistical model that have been standardized by dividing by an estimate of their standard deviation.

Least-Squares Regression

A statistical method used to determine a line of best fit by minimizing the sum of the squares of the vertical distances of the points from the line.