Bonhomme Co. issued $1,000 par value bonds with a 6% coupon rate, convertible into 25 share of Bonhomme common stock. When the bonds were issued the stock traded at $25 per share
The stock is now at $42 per share and pays a $0.10 per share annual dividend. In the near future
A) the bondholders will voluntarily convert their bonds to stock.
B) The issuing company will call the bonds and the bondholders will redeem them for the call price (par).
C) The issuing company will call the bonds and bondholders will convert them to common shares.
D) Both the issuing company and the bondholders will wait for the bonds to reach their maturity date.
Answer: C
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