A bond is convertible into common stock for $20. If the bond trades at 120, what...

A bond is convertible into common stock for $20. If the bond trades at 120, what is the parity price of the stock?

$60

$50

$25

$24

Solutions

Expert Solution

Conversion ratio = Par value / Price of one common stock = 100 / 20 =	5

Parity price = Market price of bond / Conversion ratio = 120 / 5 =	$ 24

jeff jeffy answered 2 years ago

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