Convertible [6] Suppose the firms end of period value will be: . . . f 1500 with

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Convertible [6]

Suppose the firms end of period value will be:

. . . f 1500 with probability 0.6 Value = < .,..., . [ 800 with probability 0.4 Today's firm value is 1000. The risk free rate is 5%. The firm has 10 shares of equity and 100 convertible bonds with a face value of 10 each. The bond pays no coupon.

One bond can be converted into one share.

Compute the value of the convertible bond and of the equity.

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Lectures On Corporate Finance

ISBN: B00RGENH5I

1st Edition

Authors: Peter L Bossaerts ,Bernt Arne Odegaard

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Question Posted: Oct 25, 2024 06:00 AM

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Convertible [6] Suppose the firms end of period value will be: . . . f 1500 with

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Lectures On Corporate Finance

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