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Important Information about Conversion Value of the Bond

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Plunkett Gym Equipment, Inc., has a $1,000 par value convertible bond outstanding that can be converted into 25 shares of common stock. The common stock is currently selling for $34.75 a share, and the convertible bond is selling for $960.

a. What is the conversion value of the bond?
b. What is the conversion premium?
c. What is the conversion price?

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Solution Summary

This solution provides all of the steps to compute the conversion value of the given bond.

Solution Preview

CONVERSION PRICE IS PRICE PAID FOR ORDINARY SHARES AT THE TIME OF CONVERSION

Conversion price= Parvalue of ...

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