Gertrude Said:

bond price = $1000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent.?

We Answered:

rates and price are inverted.

If the rate goes up the price goes down, if the price goes down the bond goes up.

Here the price went down, so C and D is eliminated.

A 200.00 drop would increase the rate by 2.5%. 5% is too much for a 20% decline.

Hugh Said:

(HELP ~IN HURRY) How does the convertibility feature affect the bond's price and interest rate?

We Answered:

A convertible bond is one which can be exchanged for shares of stock in that company. The conversion feature makes the issuance of a bond more appealing to the company and to some investors. This will affect the price of the bond generally lowering the price and raising the interest rate. From the company's point of view the conversion feature allows them to convert the bond to a non interest bearing security. They have to pay interest but do not have to pay dividends. From the customer's point of view the bond could turn into an equity (stock) and allow for faster appreciation.

So say for example that you have one bond par 1000 that is convertible at $20. (this means that the bond has a face value of $1000.00 and is convertible into shares of $20.00 each. that means that you would get 50 shares for your bond. $20x50=$1000.00
if the stock price is higher then the 20 then you would be better off having the shares (50 shares at 20 when the stock is trading at 30, leads to a profit of 50x$10= $500.00) if the stock price drops below the $20 mark then you would be better holding the bond.

Of course in the real world the bond would adjust in value to remain at pairity to the stock price (however always mature at $1000) but the above assumes that you hold the bond or to maturity. (I am going to assume that your question is for a test or class)