Hannon Home Products, Inc., recently issued $2 million worth of 8 percent convertible debentures. Each convertible bond

Question:

Hannon Home Products, Inc., recently issued $2 million worth of 8 percent convertible debentures. Each convertible bond has a face value of $1,000. Each convertible bond can be converted into 21.50 shares of common stock anytime before maturity. The stock price is $37.15, and the market value of each bond is $1,070.

a. What is the conversion ratio?

b. What is the conversion price?

c. What is the conversion premium?

d. What is the conversion value?

e. If the stock price increases by $2, what is the new conversion value?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...