Asked by Kameron Teague on Jul 03, 2024
Verified
The bonds of VDM, Inc. are convertible into shares of the firm's common stock at $50 per share. The current price of the common stock is $45 per share. The bonds have a $1,000 par value and currently sell for $950 apiece. What is the conversion price of these bonds?
A) $22
B) $45
C) $50
D) $55
E) $100
Convertible Bonds
Bonds that can be converted into a predefined amount of the issuing company's equity at certain times during their life, usually at the discretion of the bondholder.
Conversion Price
In finance, the Conversion Price is the predetermined price at which convertible securities can be exchanged for common shares of the issuing company.
- Understand the conversion mechanisms and pricing of convertible bonds.
Verified Answer
JL
Jasmine LeighJul 07, 2024
Final Answer :
C
Explanation :
The conversion price is given as $50 per share, which is the price at which the bonds can be converted into shares of the firm's common stock.
Learning Objectives
- Understand the conversion mechanisms and pricing of convertible bonds.
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