A Bond Has a Face Value of $10,000 and a Conversion

question 44

Multiple Choice

A bond has a face value of $10,000 and a conversion ratio of 265.The stock is currently trading at $38.80.What is the conversion price?

• A)$1.56
• B)$5.84
• C)$25.73
• D)$37.74

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Definitions:

Illusory Correlations

The perception of a relationship between two variables when none actually exists.

Memory Biases

The tendency for memory to be distorted by previous experiences, desires, or the current emotional state.

Representativeness Heuristic

A belief that outcomes will always reflect characteristics of the process that generated them (e.g., an expectation that the outcome of a series of coin flips will always look random).

Coin Flips

A random process used to generate two equally likely outcomes, typically representing "heads" or "tails."