Question: Determine whether each of the convertible bonds below has a beneficial conversion option. Each bond is $ 1,000 face value and issued at par. a.

Determine whether each of the convertible bonds below has a beneficial conversion option. Each bond is $ 1,000 face value and issued at par.
a. Eight- year, 5% convertible bond, converts to 50 shares of common stock. The market price of the common stock is $ 23 per share.
b. Five- year, 8% convertible bond, converts to 100 shares of common stock. The market price of the common stock is $ 11 per share.
c. Five- year, 8% convertible bond, converts to 25 shares of common stock. The market price of the common stock is $ 38 per share.

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a The implied exercise price is 20 per share 1000 50 shares ... View full answer

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