Question $16$

Question ID: $1544662$

ABC Corporation has outstanding a $7\mathrm{.}75\%$ convertible debenture currently trading at $102.$ The bond is convertible into common stock at $$40.$ ABC stock is trading $$45$ per share. Which of the following statements is true?

A$)$ To profit in this situation, the investor should buy the bonds and short the stock.

B$)$ The bond is at parity with the stock.

C$)$ An arbitrage opportunity does not exist in this situation.

D$)$ To profit in this situation, the investor should buy the stock and short the bonds.