Conversion prices

CFA Level II
#1

Q. Assuming common stock underwent a one for two reverse split, how owuld the features of the company’s convertible bonds be adjusted?

I understand the Conversion ratio would be reduced by 50%

B) Market conversion price of the convertible bond would be doubled.

Why is this not correct as well? If half as many common stock now, and conversion ratios reduced by 50%, I’m assuming market value of the convertible bond remain the same(I’m almost positive that is the case but this might be where I’m making the mistake) ----- > Then market conversion price of convertible bond should be doubled.

Thanks guys.

#2

Nobody on this one?

Come on. Somebody can do it.

#3

I suppose the key word here is “adjusted”. Meaning, what needs to be changed, as opposed to what does change.

The conersion ratio has to be adjusted for the math to line up the properly. The market conversion price is an output of that change.

#4

If thats the case — and i’m kind of hoping it is — then thats just a messy question. I thought my logic was correct for the other.

Unless we’re both missing something. Whatever. One question never mattered.