A Firm Has an Outstanding 15-Year Convertible Bond Issue with a $1,000

Multiple Choice

A firm has an outstanding 15-year convertible bond issue with a $1,000 par value and a stated annual interest rate of seven percent. The bond is convertible into 50 shares of common stock which has a current market price of $25. A straight bond could have been sold with a 10 percent stated interest rate. The straight value of the bond is ___________ .

A) $1,328
B) $772
C) $1,250
D) $1,000