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

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24. Piglet Pies has issued a zero-coupon 10-year bond that can be converted into 10 Piglet shares. Comparable straight bonds are yielding 8%. 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?

c. If after one year the value of the conversion option is unchanged, what is the value of the convertible bond?

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Principles Of Corporate Finance

ISBN: 9780071314176

10th Global Edition

Authors: Richard Brealey

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Question Posted: Jul 27, 2024 11:01 AM

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

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Principles Of Corporate Finance

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