Question: Scientific Instruments has a $1,000 par value convertible bond outstanding with a conversion ratio of 25. The common stock is selling for $45. The convertible bond is selling for $1,165.70.
a. What is the conversion value?
b. What is the conversion premium?
c. What is the conversion price?
d. If the common stock price falls to $20, and the pure bond price is $780, will the bond sell for greater than its conversion value?