A Firm Issues the Convertible Debt Shown Above

question 54

Multiple Choice

A firm issues the convertible debt shown above. The price of stock in this company on July 1, 2008 is $27.24. What is the minimum conversion ratio that would make a bondholder prefer to convert rather than accept the call price?

• A) 33 shares per $1,000 principal amount
• B) 36 shares per $1,000 principal amount
• C) 38 shares per $1,000 principal amount
• D) 42 shares per $1,000 principal amount

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Definitions:

Helical Gearing

A type of gear with angled teeth, used in machinery to transmit power smoothly and quietly between non-parallel shafts.

Right-Hand Gears

Gears configured for systems where the drive or operation is predominantly on the right side, used to alter the direction or speed of mechanical energy.

Teeth Rotating

The action or process of gear teeth moving in relation to one another to transmit power from one shaft to another.

Driven Gear

A Driven Gear is a gear that receives power or motion from a driving gear or input source, engaging in the transmission of power within a mechanical system to perform work.