SIE Exam Question 882: Answer and Explanation

Question: 882

A convertible bond is issued with a par value of $10,000. The bond is currently priced at $9,500, and the underlying share price is $200.

The conversion value of the bond is:

• A. $9,500.
• B. $9,700.
• C. $9,800.
• D. $10,000.

Correct Answer: D

Explanation:

Conversion value = Underlying share price × Conversion ratio

Conversion value = $200 × 50 = $10,000