A Bond with a Face Value of $1,000 Can Be

question 4

Multiple Choice

A bond with a face value of $1,000 can be exchanged for 35 shares of stock with a current market price of $22 per share.What would the conversion ratio and conversion price be if the bond's issuer declared a stock split of 3-for-1?

• A)75; $7.33
• B)105; $9.52
• C)105; $22.00
• D)35; $22.00
• E)105; $7.33

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Definitions:

Shift Left

A decrease in the supply or demand of a product in a market diagram, typically resulting in a lower equilibrium quantity and potentially a higher or lower equilibrium price.

Demand

The quantity of a good or service consumers are willing and able to purchase at various prices.

Normal Good

a good for which demand increases as the income of consumers increases and falls when their income decreases, assuming all other factors are constant.

Income Level

The amount of monetary or material wealth that an individual, family, or group receives, usually quantified on an annual basis.