Consider the following information regarding a convertible bond: Par value = $1,000 Conversion ratio = 30:1

Consider the following information regarding a convertible bond: Par value = $1,000 Conversion ratio = 30:1 Convertible bond price = $1,020 Given that the conversion premium is $30, the current share price is closest to: A. $30.00. B. $32.33. C. $33.00.Consider the following information regarding a convertible bond: Par value = $1,000 Conversion ratio = 30:1 Convertible bond price = $1,020 Given that the conversion premium is $30, the current share price is closest to:

A. $30.00. B. $32.33. C. $33.00.

Expert Solution

Stock Price = [ Convertable Bond Value - Conversion Premium ] / COnversion ratio

= [ $ 1020 - $ 30 ] / 30

= $ 990 / 30

= $ 33.00

OPtion C is correct.

jeff jeffy answered 2 years ago

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