Tangshan Mining Company Has an Outstanding Issue of Convertible Bonds

question 139

Multiple Choice

Tangshan Mining Company has an outstanding issue of convertible bonds with a $1,000 par value. The bonds have a 10 percent coupon rate, have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 10 percent and the market price of the firm's common stock is currently $15.00. Based on this information, the conversion value of the bond is ________.

• A) $1,000.00
• B) $1,500.00
• C) $750.00
• D) $1250.00

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Definitions:

Accompanying Figure

A visual representation such as a chart, graph, or image that is provided to support or illustrate textual information.

Bridge

A structure built to span a physical obstacle, such as a body of water, valley, or road, without blocking the way underneath.

Base Level

The lowest point to which erosion by running water can occur, often the level at which a river meets the sea or lake.

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The long-term pattern of weather in a particular area, typically averaged over a period of 30 years.