question archive Reading Railroad's common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par, or $1,000) are priced at $850
Reading Railroad's common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par, or $1,000) are priced at $850
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Reading Railroad's common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par, or $1,000) are priced at $850. Each debenture can be converted into 25 shares of common stock at any time before 2005. What is the conversion price, CP, and the conversion value of the bond?
a. $25.00; $1,000
b. $25.00; $ 750
c. $40.00; $ 750
d. $40.00; $ 850
e. $40.00; $1,000
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Answer:- Option (c):- $40.00; $ 750
Explanation:-
Conversion price of the bond = Par value of the bond / conversion ratio = $1,000 /25 share = $40 per share.
Conversion value of bond = Number of shares x Market price per share = 25 share X $30 = $750
