SIE Exam Question 501: Answer and Explanation

Question: 501

An investor buys 100 shares of XYZ 7% convertible preferred stock which are convertible into XYZ common stock at $20 per share. How many shares of common stock are there upon conversion?

• A. 5,000.
• B. 500.
• C. 400.
• D. 5.

Correct Answer: B

Explanation:

B: First you must determine the number of shares. Par / conversion price = 100 / 20 = 5, multiplied by the number of preferred shares: 5 × 100 = 500.