Question
A certain 6% annual pay convertible bond (maturing in 20 years) is convertible at the holders option into 20 shares of common stock. The bond
A certain 6% annual pay convertible bond (maturing in 20 years) is convertible at the
holders option into 20 shares of common stock. The bond is currently trading at $800. The stock
(which pays 75 a share in annual dividends) is currently priced in the market at $35 a share.
a. What is the bonds conversion price?
b. What is its conversion ratio?
c. What is the conversion value of this issue? What is its conversion parity?
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Fundamentals of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
12th edition
978-0133075403, 133075354, 9780133423938, 133075400, 013342393X, 978-0133075359
