Value of conversion option to bond holder is 740 and rate...

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Examveda

Value of conversion option to bond holder is $740 and rate of return on non-convertible bond is $540 then rate of return on convertible bond is

A. 1.37%

B. $1,280

C. $1.37

D. $200

Answer: Option D

Rate of return on convertible bond = Value of conversion option to bond holder - Rate of return on non-convertible bond
= $740 - $540 = $200.

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