Question

A $1,000 par value bond with a conversion price of $50 has a conversion ratio of
a. $40
b. 40 shares
c. $20
d. 20 shares

Answer 1

Answer:

Conversion ratio will be 20 shares

Explanation:

We have given bond value = $1000 per bond

Conversion price = $50

We have to find the conversion ratio

Conversion ratio is the ratio of bond value per bond to the conversion price

So conversion ratio will be equal to $=\frac{bond\ value\ per\ bond}{conversion\ price}=\frac{1000}{50}=20\ shares$

So conversion ratio will be 20 shares

So option (D) will be correct answer