A. $570
B. $130
C. $670
D. $1.59
✅ The correct answer is option B.
Rate of return on convertible bond = Rate of return on non-convertible bond – Value of conversion option to bond holder
= $350 – $220 = $130.
Rate of return on convertible bond = Rate of return on non-convertible bond – Value of conversion option to bond holder
= $350 – $220 = $130.