SIE Exam Practice Question 456
Question: 456
XYZ has 8% subordinated debentures trading in the market place at $120. They are convertible into XYZ common stock at $25 per share. What is the parity price of the common stock?
Correct Answer: B
Explanation:
B: The parity price is found by determining the number of shares that can be received upon conversion par / conversion price = 1,000 / 25 = 40 shares. Then the parity price equals the current market value of the convertible / no. of shares, 1,200 / 40 = $30.
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