A convertible bond issue has a conversion premium of $50 at a time when the underlying...

A convertible bond issue has a conversion premium of $50 at a time when the underlying share’s price is $35. The convertible has a par value of $1,000 and is convertible into 80 shares of the issuer’s stock. The convertible bond’s price is closest to : A. $1,050.B. $2,750.C. $2,850.

Expert Solution

Convertible value= (number of shares X underlying share price)+conversion premium

= (80*35)+50

=$2850

Correct answer is option ( C ) $2850

jeff jeffy answered 2 years ago

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