Consider a convertible bond with a face value of $1,000 and a conversion ratio of 40. If the bond is convertible into common stock of the issuer, and the common stock is trading for $36 per share, the conversion value of this bond is closest to:
A) $1,000
B) $1,440
C) $36,000
D) $40,000

Question

Quizplus · Accepted Answer

The conversion value of the bond is calculated by multiplying the current stock price by the conversion ratio. Therefore, the conversion value is $36 * 40 = $1,440.

Consider a Convertible Bond with a Face Value of $1,000