Question

Ford Motor Company has issued 8% convertible debentures, convertible at a 25:1 ratio. Currently the debenture is trading at 110. The stock is trading at 38. What is the conversion price of the stock

Answer 1

40

Step-by-step explanation:

Calculation for the conversion price

Based on the information given we were told that the company's convertible ratio is 25:1 which simply means that 1,000 par will be divided by the covertible ratio .

Hence,

Conversion price of the stock = 1,000/25

Conversion price of the stock = 40

Therefore the Conversion price of the stock will be 40