A $1000 Par Value Convertible Bond Has a Conversion Price

question 107

Multiple Choice

A $1000 par value convertible bond has a conversion price of $50. It is currently selling for $1,120 despite the fact that the bond's coupon rate and the market rate are equal. The common stock obtained upon conversion is selling for $54 per share. What is the convertible bond's conversion premium?

• A)$4
• B)$40
• C)$80
• D)$120

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Definitions:

NSF Check

A check that cannot be processed due to insufficient funds in the account it was drawn on, also known as a "bounced check."

EFT Deposit

An electronic funds transfer directly into a bank account, considered a safe and efficient way to transfer money.

Bank Correction

Adjustments made by a bank to rectify any discrepancies found in an account balance.

Cash Drawer

A compartment within a cash register where the cash from transactions is kept.