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29 November, 06:17

Ford Motor Company has issued 8% convertible debentures, convertible at a 10:1 ratio. Currently the debenture is trading at 94. The stock is trading at $80. What is the conversion price of the stock

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  1. 29 November, 07:18
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    Answer: $100

    Explanation:

    Sometimes Debt instruments like Debentures and Bonds are convertible to shares in the company.

    To calculate the Conversion Price, the following formula is used;

    = Par Value / Conversion Ratio

    = 1,000/10

    = $100

    Par value is usually $1,000 for such instruments.
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