If the common stock price falls to 20 and the pure bond


Question: Scientific Instruments has a $1,000 par value convertible bond outstanding with a conversion ratio of 25. The common stock is selling for $45. The convertible bond is selling for $1,165.70.

a. What is the conversion value?

b. What is the conversion premium?

c. What is the conversion price?

d. If the common stock price falls to $20, and the pure bond price is $780, will the bond sell for greater than its conversion value?

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Finance Basics: If the common stock price falls to 20 and the pure bond
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