A Convertible Bond Has a Face Value of $5,000, a Conversion

A convertible bond has a face value of $5,000, a conversion price of $40, a coupon rate of 6 percent, semi-annual payments, and a maturity of 12 years. Similar bonds are currently yielding 7.5 percent. The current price of the related stock is $38 per share. What is the conversion value of this bond?

A) $5,600
B) $5,000
C) $4,750
D) $4,930
E) $5,300

Correct Answer:

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