Question
2. A certain 6% semiannual coupon, $1,000 par value bond with 20 years to maturity is convertible at the holders option to 20 shares of
2. A certain 6% semiannual coupon, $1,000 par value bond with 20 years to maturity is convertible at the holders option to 20 shares of common stock. The current market price of the bond is $800. The common stock is currently priced at $35/share. Answer the following. a. What is the bonds conversion price? b. What is the conversion ratio? c. What is the conversion value? d. If the bond is priced as a straight bond (investment value of convertible) with yield to maturity of 8%, i) what is the investment value of the convertible? ii) What is the conversion premium?
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Professionals Handbook Of Financial Risk Management
Authors: Lev Borodovsky, Marc Lore
1st Edition
0750641118, 978-0750641111
