1. A convetible bond is sold with a conversion ratio of 40. Find the conversion Price on this bond. (Bond value is $1,000). Now answer the test question below: Which of the following prices represent the most logical price for the common stock of this company in the stock market at this time. Once you know the conversion price, you can easily guess the answer.
A) $25
B) $30
C) $20
D) $10
2. You are expecting a payment of C$100,000 two years from now. The risk-free rate of return is 1.6 percent in the U.S. and 1.8 percent in Canada. The inflation rate is 1.7 percent in the U.S. and 1.9 percent in Canada. Assume the current exchange rate is C$1 = $.92. How much will the payment two years from now be worth in U.S. dollars?
$95,164
$87,470
$85,368
$91,633
$98,210