Question
A certain 6% annual coupon rate convertible bond ($1,000 par value, maturing in 20 years) is convertible at the holder's option into 20 shares of
A certain 6% annual coupon rate convertible bond ($1,000 par value, maturing in 20 years) is convertible at the holder's option into 20 shares of common stock. The bond is currently trading at $800. The stock (which pays 57 cents a share in annual dividends) is currently priced in the market at $34.49 a share.
- What is the bond's conversion price?
- What is its conversion ratio?
- What is the conversion value of this issue? What is its conversion parity?
- What is the conversion premium, in dollars and as a percentage?
- What is the bond's payback period?
- If comparably rated, nonconvertible bonds sell to yield 8%, what is the investment value of the convertible?
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Financial Statement Analysis
Authors: Martin S. Fridson, Fernando Alvarez
5th Edition
1119457149, 978-1119457145
