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Nana76 [90]
2 years ago
13

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?
Business
1 answer:
JulijaS [17]2 years ago
6 0

Answer: $825

Explanation:

Convertible bonds or debentures can be converted into stock in a company by the holders.

The Conversion Value of the bond is given by;

Conversion Value of the Bond = Stock Price * Conversion Ratio

Conversion Ratio = 25 shares for one debenture.

= 25/1

= 25

Conversion Value of the Bond = Stock Price * Conversion Ratio

= 33 * 25

= $825

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