WMT 9s of 15 have a conversion price of $11.00. If WMT common stock sells for $8 per share, what is the conversion ratio for this bond?
A. 90.91
B. 111.11
C. 125.00
D. 1.370.00
E. 727.27
F. 888.88
The conversion ratio is the number of common shares received at the time of conversion for each convertible security . The higher the ratio, the higher the number of common shares exchanged per convertible security . The conversion ratio is determined at the time the convertible security is issued and has an impact on the relative price of the security. |
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conversion ratio = par value of bond/ conversion price |
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Par or face value of bond = 1000 ( assumed) |
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Conversion price is |
11 |
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Conversion ratio |
90.91(1000/11) |
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Answer A |
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