Question
A convertible bond has a face value of $1,000 and the conversion price is $40 per share. The stock is selling at $40 per share.
A convertible bond has a face value of $1,000 and the conversion price is $40 per share. The stock is selling at $40 per share. The bond pays $55 per year in interest and is selling in the market for $975. It matures in 7 years. Market rates are 10% annually.
(I) What is the conversion ratio?
(II) What is the conversion value?
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Financial Management Theory And Practice
Authors: Eugene Brigham, Michael Ehrhardt, Jerome Gessaroli, Richard Nason
3rd Canadian Edition
017658305X, 978-0176583057
