Frosty, Inc. presently has an outstanding 5 percent, $1,000 convertible bond. The bond can be converted into 25 shares of common stock and it is callable at $1,050. Right now, the current market price of the firm's stock is $41 per share. The bond holder will_______. A) allow the call to be exercised B) convert the bond into stock C) sell the bond on the secondary market D) do nothing and wait until the stock price goes up further
Frosty, Inc. presently has an outstanding 5 percent, $1,000 convertible bond. The bond can be converted into 25 shares of common stock and it is callable at $1,050. Right now, the current market price of the firm's stock is $41 per share. The bond holder will_______. A) allow the call to be exercised B) convert the bond into stock C) sell the bond on the secondary market D) do nothing and wait until the stock price goes up further
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Frosty, Inc. presently has an outstanding 5 percent, $1,000 convertible bond. The bond can be converted into 25 shares of common stock and it is callable at $1,050. Right now, the current market price of the firm's stock is $41 per share. The bond holder will_______.
- A) allow the call to be exercised
- B) convert the bond into stock
- C) sell the bond on the secondary market
- D) do nothing and wait until the stock price goes up further
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