Value of conversion option to bond holder is 550 and rate...

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Examveda

Value of conversion option to bond holder is $550 and rate of return on non-convertible bond is $270 then rate of return on convertible bond is

A. 2.04%

B. $2.04

C. $280

D. $820

Answer: Option C

Rate of return on convertible bond = Value of conversion option to bond holder - Rate of return on non-convertible bond
= $550 - $270 = $280.

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