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A $1000 Par Value Convertible Bond Has a Conversion Price

question 85

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A $1000 par value convertible bond has a conversion price of $25. It is currently selling for $1,200, despite the fact that the bond's coupon rate and the market interest rate are equal. The common stock obtained upon conversion is selling for $27 per share. What is the convertible bond's conversion ratio?


Definitions:

Depth of Filling

The extent to which a cavity or mold is filled with material during a manufacturing or casting process.

Spur Gears

A type of gear with straight teeth mounted on a parallel shaft, used for transmitting motion and torque.

Pitch Diameter

The diameter of an imaginary circle on a gear or screw, where the width of the gear tooth and the space between teeth are equal.

Reciprocating Motion

A type of mechanical motion where an object moves back and forth along a straight path, common in pistons and pumps.

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