Given the following information concerning a convertible bond Coupon 6 percent ($60 per $1,000 bond) Exercise price $25 Maturity date 20 years Call price $1,040 Price of the common stock $30 a If this bond were nonconvertible, what would be its approximate value if comparable interest rates were 9 ...

a Value of the bond as nonconvertible debt P B 60 60 1000 1 09 1 09 ...

Given the following information concerning a convertible bond: Coupon: 6 percent ($60 per $1,000 bond)

Question:

Given the following information concerning a convertible bond:
• Coupon: 6 percent ($60 per $1,000 bond)
• Exercise price: $25
• date: 20 years
• Call price: $1,040
• Price of the common stock: $30
a. If this bond were nonconvertible, what would be its approximate value if comparable interest rates were 9 percent?
b. How many shares can the bond be converted into?
c. What is the value of the bond in terms of stock?
d. What is the current minimum price that the bond will command?
e. Is there any reason to anticipate that the firm will call the bond?
f. What do investors receive if they do not convert the bond when it is called?
g. If the bond were called, would it be advantageous to convert?
Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...