Final answer:
The conversion price of a bond is determined by dividing the bond's face value by its conversion ratio. This price is what the bondholder would pay per share when converting bonds into stock.
Step-by-step explanation:
To calculate the conversion price of a bond with a given face value and conversion ratio, you simply divide the face value of the bond by the conversion ratio. The conversion price is the price at which you can convert each bond into shares of the issuing company's stock.
For example, if a bond has a face value of $1,000 and a conversion ratio of 25, the conversion price would be $1,000 divided by 25. This gives you a conversion price of $40 per share. It means that the bondholder can convert each bond into shares of stock at a price of $40 per share.