Final answer:
The new parity price of the bond when the market value falls to 800 can be calculated using the conversion ratio.
Step-by-step explanation:
The parity price is the price at which a convertible bond, which can be converted into common stock, is equal in value to the common stock itself. In this case, the bond is convertible to common stock at $20 per share. If the market value falls to $800, we can calculate the new parity price as follows:
New Parity Price = Market Value / Conversion Ratio
Conversion Ratio = Bond Conversion Price / Share Price
Using the given values, we have:
Bond Conversion Price = $20 per share
Share Price = $800 per share
Hence, the Conversion Ratio is 20 / 800 = 0.025
Then, the New Parity Price is 800 / 0.025 = $32,000 per share.