Newcomb Company has a bond outstanding with a $1,500 par value and convertible at $30 per share.

Question:

Newcomb Company has a bond outstanding with a $1,500 and convertible at $30 per share. What is the bond’s conversion ratio? If the underlying stock currently trades at $25 per share, what is the bond’s conversion value? Would it be advisable for a bondholder to exercise the conversion option?

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...