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10 August, 11:26

A corporation has issued 10% convertible debentures, convertible into 40 shares of common stock. The current market price of the common stock is $25.25. If the bonds are trading at parity, they are priced at: A 100 B 101 C 106 D 107

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  1. 10 August, 11:35
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    (B) 101

    Explanation:

    The bonds are convertible into 40 shares of common stock.

    The current market value of the common stock is $25.25

    The parity price of the bonds will be 40 x $25.25 = $1,010.

    The bonds are trading at parity so they are priced at $1,010 = $1,010

    Per bond = 101.
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