A Bond with a Face Value of $1000 Is Convertible

question 75

Multiple Choice

A bond with a face value of $1000 is convertible to common stock at a conversion ratio of 60.If the stock is currently trading at $8.20 per share,the value of the bond is probably closest in value to which of the following?

• A)less than $492
• B)about $492
• C)about $508
• D)about $1000
• E)above $1666

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Definitions:

Incontestability Clause

A provision in insurance policies that prevents the insurer from disputing the policy's validity after it has been in force for a specific period, usually two years, except under certain circumstances.

Material Misrepresentation

A false statement of a substantial fact that induces someone to enter into a contract or transaction.

Insurance Application

A formal request for coverage, providing necessary information for underwriting to evaluate and issue a policy.

Arbitration Clause

A provision in a contract that requires parties to resolve disputes through arbitration rather than through the court system.