Objective type questions on Conversion price of share and bond valuation

1. Reading Railroad\'s common stock is currently priced at $30, and its 8 percent convertible debentures (issued at par, or $1,000) are priced at $850. Each debenture can be converted into 25 shares of common stock at any time before 2005. What is the conversion price, CP, and the conversion value of the bond?

a. $25.00; $1,000

b. $25.00; $ 750

c. $40.00; $ 750

d. $40.00; $ 850

e. $40.00; $1,000

2. B&O Railroad's convertible debentures were issued at their $1,000 par value in 1993. At any time prior to maturity on February 1, 2013, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price, Pc?

a. $ 25

b. $1,000

c. $ 40

d. $1,025

e. $ 50