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A Convertible Bond Is Selling for $800

Question 42

Multiple Choice

A convertible bond is selling for $800. It has 10 years to maturity,a $1,000 face value,and a 10% coupon. Similar nonconvertible bonds are priced to yield 14%. The conversion price is $50 per share. The stock currently sells for $31.375 per share. The conversion premium is:


A) 37.25%.
B) 43.33%.
C) 59.36%.
D) 66.67%.
E) None of these.

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