Question1: Reading Railroad's common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par or $1,000) are priced at $850. Each debenture can be converted into 25 shares of common stock at any time before 2005. Calculate the conversion price, CP, & the conversion value of the bond?
[A] $40.00; $ 750
[B] $40.00; $ 850
[C] $40.00; $1,000
[D] $25.00; $1,000
[E] $25.00; $ 750
Question2: B&O Railroad's convertible debentures were issued at their $1,000 par value in 1993. At any time prior to maturity on February 1, 2013, a debenture holder can exchange a bond for twenty-five shares of common stock. What is the conversion price, Pc?
[A] $ 40
[B] $1,025
[C] $ 50
[D] $ 25
[E] $1,000