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

Question:

Convertible Bonds 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?

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