Gentherm Inc. has a convertible bond issue outstanding. Each bond, with a face value of $1,000, can be converted into common shares at a rate of 42.25 shares of stock per $1,000 face value bond (the conversion rate), or $19.85 per share. Gentherm’s common stock is page 207 trading (on the NYSE) at $19.85 per share and the bonds are trading at

$1,025. (LG 6-2)

a. Calculate the conversion value of each bond.

b. Determine if it is currently profitable for bond holders to convert their bonds into shares of Gentherm common stock.

 LO.1