The Bates Company Has Debentures ($1,000 Par Value) Outstanding That

The Bates Company has debentures ($1,000 par value) outstanding that are convertible into the company's common stock at a price of $50. The convertibles have a coupon interest rate of 9% and mature 20 years from today. Straight debt of equivalent risk is yielding 12% today. The company's common stock today is selling at $60 a share. Calculate the conversion value of the issue.

A) $1,000
B) $1,200
C) $800
D) $300

Correct Answer:

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