Value of conversion option to bond holder is 220 and rate...

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Examveda

Value of conversion option to bond holder is $220 and rate of return on non-convertible bond is $350 then rate of return on convertible bond is

A. $570

B. $130

C. $670

D. $1.59

Answer: Option B

Rate of return on convertible bond = Rate of return on non-convertible bond - Value of conversion option to bond holder
= $350 - $220 = $130.

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