SIE practice questionhardConvertible Preferred Stock
An investor holds 100 shares of $100 par, 6% convertible preferred stock, convertible at $20. If the market price of common stock rises to $30, what is the conversion value of the preferred shares?
- A$12,000
- B$6,000
- C$15,000✓ Correct answer
- D$10,000
Explanation
Why C — $15,000
Each preferred share converts to 5 shares (100/20). 100 × 5 = 500 shares × $30 = $15,000 conversion value. Other answers use incorrect conversions.
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