A Firm Issues the Convertible Debt Shown Above

question 19

Multiple Choice

A firm issues the convertible debt shown above. The price of stock in this company on July 1, 2008 is $15.14. What is the minimum call price that would make a bondholder prefer to accept the call rather than convert?

• A) par plus 3.29%
• B) par plus 3.89%
• C) par plus 4.49%
• D) par plus 5.98%

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Definitions:

Cash Basis

An accounting method where revenues and expenses are recorded only when cash is received or paid, regardless of when transactions occur.

Supplies Expense

The cost incurred from using or consuming supplies within a business operation.

Accounting Period

A specific time period at the end of which an organization prepares financial statements, commonly a year, quarter, or month.

Adjust

To make modifications to records, accounts, or systems to correct discrepancies or align them with actual conditions.