1. A bond with a face value of $5,000 can be exchanged for 70 shares of stock. The bond has a coupon rate of 6.5 percent which equals the market rate of interest. Assume the option premium is $50. What is the market value of the bond if the stock is selling for $68.90 a share and the bond matures in exactly one year?
$4,744.84 $4,873.00 $5,000.00 $4,940.00 $5,050.00
2. A large stock dividend:
Increases the capital in excess of par value by the market value minus the par value of each share issued.
Reduces retained earnings by the total market value of the issued shares.
Reduces retained earnings by the par value of each share issued.
Reduces the par value per share.
Does not affect the equity accounts or the par value per share.