A convertible bond has a conversion price of $40 per share. If the market value of the bond rises to a 12½ point premium over par, which of the following are TRUE?
Conversion ratio is 25:1.
Conversion ratio is 28:1.
Parity price of the common stock is $42.
Parity price of the common stock is $45.
A) II and IV.
B) I and IV.
C) I and III.
D) II and III.
Answer: B) I and IV.