Looper Industries Bonds Have a Face Value of $1,000 and Can

question 26

Multiple Choice

Looper Industries bonds have a face value of $1,000 and can be exchanged for 30 shares of stock.The stock is selling for $35 a share.Looper has an outstanding call option on the bonds at $1,040.If the bonds are called,the holders must either convert or surrender their bonds.What should be the current market value of one of these bonds if the option premium per bond is $15? Assume the bond coupon rate equals the market rate of interest at time of call.

• A)$1,040
• B)$1,065
• C)$1,025
• D)$1,030
• E)$1,035

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