Multiple Choice
A convertible bond pays interest annually at a coupon rate of 5% on a par value of $1,000. The bond has 10 years maturity remaining and the discount rate on other-wise identical non-convertible debt is 5%. The bond is convertible into shares of common stock at a conversion price of $25 per share (i.e. the bond is exchangeable for 40 shares) . Today's closing stock price was $31.25. What is the floor value of this bond?
A) $800.00
B) $1,000
C) $1,250
D) None of the above
Correct Answer:
Verified
Correct Answer:
Verified
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