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5 May, 08:02

A corporation issues $50 par convertible preferred stock, convertible at $20 per share, when the market price of the common is currently $10. Which statement is TRUE?

A. The conversion ratio is 10:1

B. The conversion ratio is 5:1

C. The conversion ratio is 2.5:1

D. The conversion ratio is 2:1

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Answers (2)
  1. 5 May, 09:52
    0
    B. The conversion ratio is 5:1

    Explanation:

    The conversion ratio is Par Value / Conversion Price.

    $100 Par / $20 Conversion Price = 5:1 Conversion Ratio.
  2. 5 May, 11:05
    0
    C) The conversion ratio is 2.5:1

    Explanation:

    The conversion ratio is:

    Par Value / Conversion Price.

    Hence,

    $50 Par / $20 Conversion Price = 2:5:1
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Home » Business » A corporation issues $50 par convertible preferred stock, convertible at $20 per share, when the market price of the common is currently $10. Which statement is TRUE? A. The conversion ratio is 10:1 B. The conversion ratio is 5:1 C.
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