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 2 years ago
B & O Railroad's convertible debentures were issued at their $1,000 par value in 2008. At
any time prior to maturity on February 1, 2028, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price, Pc ?
a. $25
b. $40
c. $1,025
d. $1,000
e. $50
 2 years ago
B & O Railroad's convertible debentures were issued at their $1,000 par value in 2008. At any time prior to maturity on February 1, 2028, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price, Pc ? a. $25 b. $40 c. $1,025 d. $1,000 e. $50

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theduke1845
 2 years ago
Best ResponseYou've already chosen the best response.0A convertible note (or debenture or wtv) is usued at par and you know from the beginning you get 25 shares for each note. So, $1,000=25 shares > divide each side by 25 and you get your conversion ratio, $1000/25=conversion ratio of 40. The conversion price is the ratio of the par value of your note to your conversion ratio, so $1,000/40=$25. http://www.maileyrogers.com/documents/Intro_to_Convertible_Debentures.pdf
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