Piglet Pies has issued a zero-coupon 10-year bond that can be converted into 10 Piglet shares. Comparable

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Piglet Pies has issued a zero-coupon 10-year bond that can be converted into 10 Piglet shares. Comparable straight bonds are yielding 8 percent. Piglet stock is priced at $50 a share.

(a) Suppose that you had to make a now-or-never decision on whether to convert or to stay with the bond. Which would you do?

(b) If the convertible bond is priced at $550, how much are investors paying for the option to buy Piglet shares?

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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Question Posted: Jun 09, 2011 05:31 AM

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Piglet Pies has issued a zero-coupon 10-year bond that can be converted into 10 Piglet shares. Comparable

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Principles of Corporate Finance

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