Question
A certain % annual coupon rate convertible bond ($1,000 par value, maturing in 20 years) is convertible at the holder's option into shares of common
A certain % annual coupon rate convertible bond ($1,000 par value, maturing in 20 years) is convertible at the holder's option into shares of common stock. The bond is currently trading at $. The stock (which pays a share in annual dividends) is currently priced in the market at $ a share. a. What is the bond's conversion price? b. What is its conversion ratio? c. What is the conversion value of this issue? What is its conversion parity? d. What is the conversion premium, in dollars and as a percentage? e. What is the bond's payback period? f. If comparably rated, nonconvertible bonds sell to yield what is the investment value of the convertible?
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