The common stock of Southern Airlines currently sells for $33, and its 8% convertible debentures (issued at par, or $1,000) sell

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3 years ago

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The common stock of Southern Airlines currently sells for $33, and its 8% convertible debentures (issued at par, or $1,000) sell

for $850. Each debenture can be converted into 25 shares of common stock at any time before 2025. What is the conversion value of the bond? a. $866.25 b. $825.00 c. $707.33 d. $783.75 e. $744.56

Business

1 answer:

Finger [1] · Answer 1 · 2022-09-15T12:02:39+03:00

Answer: Option B

Explanation: The conversion value is the market value of the asset into which the security is to be exchanged. It can be computed using following formula :-

conversion value = (stock price) * ( conversion ratio)

conversion value = ($33) * (25)

conversion value = $825