A Firm Issues the Convertible Debt Shown Above

question 9

Multiple Choice

A firm issues the convertible debt shown above.The price of stock in this company on July 1,2008 is $28.20.What is the minimum conversion ratio that would make a bondholder prefer to convert rather than accept the call price?

• A)32 shares per $1000 principal amount
• B)35 shares per $1000 principal amount
• C)37 shares per $1000 principal amount
• D)41 shares per $1000 principal amount

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Definitions:

Depreciation Method

A systematic approach for allocating the cost of a tangible asset over its useful life, reflecting the asset's consumption, wear and tear, or obsolescence.

Residual Value

The estimated value that an asset will have at the end of its useful life, often considered for depreciation calculations.