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Swift Bicycles plans to issue convertible bonds to finance its future growth. Each convertible bond has a

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Swift Bicycles plans to issue convertible bonds to finance its future growth. Each convertible bond has a face value equal to $1,000 and can be converted into 25 shares of common stock. What is the minimum stock price that would make it beneficial for bondholders to convert their bonds?

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...
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CFIN

CFIN

ISBN: 978-1305666870

5th edition

Authors: Scott Besley, Eugene Brigham

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Callable bond: A bond that can be redeemed by the issuer before the maturity date, potentially leaving the bondholder without future interest payments. They usually offer higher yields than non-callable bonds. Puttable bond: A bond that gives the bondholder the right to sell the bond back to the issuer before the maturity date, providing flexibility to the bondholder. They typically offer lower yields than non-puttable bonds. Convertible bond: A bond that can be converted into a predetermined number of shares of the issuing company\'s common stock at the bondholder\'s discretion. They offer the potential for capital appreciation in addition to periodic interest payments and typically offer lower yields than non-convertible bonds. Zero coupon bond: A bond that does not pay periodic interest payments, but instead is sold at a deep discount to its face value and redeemed at face value upon maturity, providing a capital gain to the investor. They are often used to fund long-term projects and have longer maturities than other bonds.

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