What is the conversion value, Accounting Basics

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What is the conversion value

Problem:

Eastern Digital Corp has a convertible bond outstanding with a coupon rate of 9% and a maturity date of 20 years. The market rate of interest on bonds of the same risk class carry a 10% return. The conversion ratio is 40. The company's common stock is selling for $18.25 per share. The bond is selling for $970.

Required:

Question 1: What is the conversion value?

Question 2: What is the conversion premium?

Note: Show supporting computations in good form.

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Accounting Basics: What is the conversion value

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Accounting Basics: What is the conversion value

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