What Is the Value of the Conversion Feature If the Company

question 70

Multiple Choice

What is the value of the conversion feature if the company can issue either for a par value of $1000: 20 year, semiannual plain vanilla bonds at 6.5% or 20 year, semiannual 4.8% convertible bonds (convertible to 15 shares of common stock)

• A) $811.23
• B) $540.82
• C) $217.02
• D) $188.77

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Definitions:

Distress

Negative stress, the kind felt during an illness or when going through a divorce.

Major Life Changes

Significant events or transitions in a person's life that require adaptation, such as marriage, divorce, moving to a new location, or significant loss.

Cognitive Appraisal

The thinking evaluation of an event or situation that varies from person to person and, for an individual, from day to day.

Constant

A situation or state of affairs that does not change over time.