a. Because the exchange ratio is five shares of common stock to one bond, bondholders would be interested in converting the bonds to common stock if the market price per share of common stock was at least 20% (or more) of the market price per bond.  For example, when the bonds were issued on January 1, 2002 at their $1,000 face amount, the market rate of interest and the stated rate were both 12%, and the market price per bond was $1,000.  At that time, bondholders would not have been willing to convert their bonds unless the common stock was trading at price of $200 per share or more.