Question

A certain 6% annual coupon rate convertible bond (maturing in 20 years) is convertible at the holder's option into 20 shares of common stock. The bond is currently trading at $800. The stock (which pays 72¢ a share in annual dividends) is currently priced in the market at $36.34 a share.

a. What is the bond's conversion price?

b. What is its conversion ratio?

c. What is the conversion value of this issue?

What is its conversion parity?

d. What is the conversion premium, in dollars and as a percentage?

e. What is the bond's payback period?

f. If comparably rated, nonconvertible bonds sell to yield 8 % ,what is the investment value of the convertible?

Answer #1

A certain 6% annual coupon rate convertible bond (maturing in
20 years) is convertible at the holder's option into 20 shares of
common stock. The bond is currently trading at $800. The stock
(which pays 65¢ a share in annual dividends) is currently priced
in the market at $30.91 a share. a. What is the bond's
conversion price? b. What is its conversion ratio? c. What is the
conversion value of this issue? What is its conversion parity? d.
What...

A certain 7 ?% annual coupon rate convertible bond? (maturing in
20? years) is convertible at the? holder's option into 23 shares of
common stock. The bond is currently trading at ?$820 . The stock?
(which pays 69 ?¢ a share in annual? dividends) is currently priced
in the market at ?$36.65 a share.
a.What is the? bond's conversion? price?
b.What is its conversion? ratio?
c.What is the conversion value of this? issue? What is its
conversion? parity?
d.What is...

A certain 5% annual coupon rate convertible bond (maturing in
20 years) is convertible at the holder's option into 17 shares of
common stock. The bond is currently trading at $790. The stock
(which pays 77¢ a share in annual dividends) is currently priced
in the market at $33.71 a share. a. What is the bond's
conversion price?
b. What is its conversion ratio?
c. What is the conversion value of this issue?
What is its conversion parity?
d. What...

A certain 6% annual coupon rate convertible bond (maturing in
20 years) is convertible at the holder's option into 20 shares of
common stock. The bond is currently trading at $800. The stock
(which pays 85¢ a share in annual dividends) is currently priced
in the market at $35.68 a share.
a. What is the bond's conversion price? (Round to the nearest
cent.)
b. What is its conversion ratio? (Round to the nearest
integer.)
c. What is the conversion value...

A certain 7?% annual coupon rate convertible bond? (maturing in
20? years) is convertible at the? holder's option into 23 shares of
common stock. The bond is currently trading at ?$820. The stock?
(which pays 92?¢ a share in annual? dividends) is currently priced
in the market at $35.87a share.
a.??What is the? bond's conversion? price?
b.??What is its conversion? ratio?
c.??What is the conversion value of this?
issue? What is its conversion? parity?
d.??What is the conversion? premium, in...

A convertible bond is selling for $800. It has 10 years to
maturity, a $1000 face value, and a 10% coupon paid semi-annually.
Similar nonconvertible bonds are priced to yield 14%. The
conversion price is $50 per share. The stock currently sells for
$31.375 per share. Determine the bond's option value.

You have been hired to value a new 20-year callable, convertible
bond. The bond has a 5 percent coupon, payable semi-annually, and
its face value is $1,000. The conversion price is $75, and the
stock currently sells for $55.
What is the minimum value of the bond? Comparable nonconvertible
bonds are priced to yield 11 percent.
What is the conversion premium for this bond?

You have been hired to value a new 20-year callable, convertible
bond. The bond has a 5 percent coupon, payable semi-annually, and
its face value is $1,000. The conversion price is $55, and the
stock currently sells for $45.
What is the minimum value of the bond? Comparable nonconvertible
bonds are priced to yield 6 percent.
What is the conversion premium for this bond?

1. A 9.35%,
18-year convertible bond is selling at $1,195. The
bond has a conversion rate of 38. The common stock is trading at
23.12. Comparable straight bonds are selling to yield 9 %.
The common
stock pays an annual dividend of 35
cents per
share. Calculate the
bond’s conversion value, premium (if any) over
conversion value,
investment value, and premium(if any)
over investment value, and payback period.

Best China Corp. has just issued a 30-year callable, convertible
bond with a coupon rate of 6 percent annual coupon payments. The
bond has a conversion price of $93. The company's stock is selling
for $28 per share. The owner of the bond will be forced to convert
if the bond's conversion value is ever greater than or equal to
$1,100. The required return on an otherwise identical
nonconvertible bond is 7 percent.
a. What is the minimum value of...

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