Convertible bonds with a conversion ratio

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City Tire has issued 100 convertible bonds with a conversion ratio of 20. Currently the bonds have not been converted and City Tire has 3,000 shares of common stock outstanding. (a) If the convertible bondholders convert their bonds into stock, how many shares of City Tire stock will be outstanding? (b) If the stock price is $30, what is the conversion value of the bonds? (c) The convertible bonds are approaching maturity. On the maturity date each bondholder who has not converted is entitled to a final payment of $1000. What is the lowest stock price at which a convertible bondholder would find it in his/her interest to convert the bonds before they mature?

Reference no: EM13946963

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