Question ID: $1558032$

An investor purchased $20$ XYZ Corporation $6$ s convertible bonds for $97$ that mature in $20$ years. The bonds are convertible into $40$ shares. However, three years after the purchase, the corporation declared a $20\%$ stock dividend when the bond was trading for

Then six months later, the investor decided to convert the bonds which were then trading at $104$ into stock and sell the common shares which are trading were parity. What is the capital gain or loss on the bonds and the conversion price of the shares?

A$)$ Long term capital gain of $$2,000$ and conversion price of $$26\mathrm{.}00$

B$)$ Short term capital loss of $$2,000$ and conversion price of $$25\mathrm{.}00$

C$)$ Short term capital gain of $$1,400$ and conversion price of $21\mathrm{.}875$

D$)$ Long term capital gain of $$1,400$ and conversion price of $$20\mathrm{.}83$