Answered

A corporation issues $50 par convertible preferred stock, convertible at $20 per share, when the market price of the common is currently $10. Which statement is TRUE?

A. The conversion ratio is 10:1
B. The conversion ratio is 5:1
C. The conversion ratio is 2.5:1
D. The conversion ratio is 2:1

Answer :

busyfingers1193

Answer:

C) The conversion ratio is 2.5:1

Explanation:

The conversion ratio is:

Par Value / Conversion Price.

Hence,

$50 Par / $20 Conversion Price = 2:5:1

abdullahfarooqi

Answer:

B. The conversion ratio is 5:1

Explanation:

The conversion ratio is Par Value / Conversion Price.

$100 Par / $20 Conversion Price = 5:1 Conversion Ratio.

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