Asked by Kayla Alvarez on May 10, 2024
Verified
Erik Wells bought a Sandia Corporation convertible bond for $1,000. The bond was convertible to 50 shares of stock. At the time of the purchase, the stock was selling for $20 per share. At the end of two years, the stock was selling for $28 per share. Erik converted his bond. Assuming the market value of the bond had not changed, how much profit did Erik realize by converting?
Convertible Bond
A financial instrument that allows the bondholder to convert the bond into a predetermined number of shares of common stock of the issuing company.
Market Value
The dollar amount required to replace the inventory as of the inventory date.
Stock Selling
The process of disposing shares of a company to investors in exchange for capital, also referred to as stock trading when done frequently.
- Compute the gain obtained through the conversion of bonds into shares.
Verified Answer
NL
Learning Objectives
- Compute the gain obtained through the conversion of bonds into shares.