Question
A convertible bond has a face value of $1,000 and a conversion price of $22.50. The bond has a 6 percent coupon and pays interest
A convertible bond has a face value of $1,000 and a conversion price of $22.50. The bond has a 6 percent coupon and pays interest semi-annually. The bond matures in six years. Similar bonds are yielding 7 percent. The current price of the stock is $21.24.
1)What is the straight bond value?
2)What is the conversion ratio ?
3)What is the conversion value?
4)What is the minimum value of the bond?
5)What is the conversion premium for this bond?
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Intermediate accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
7th edition
978-0077614041, 9780077446475, 77614046, 007744647X, 77647092, 978-0077647094
