Question
ABC Inc. has an outstanding convertible bond. The bond can be converted into 45 shares of companys stock currently trading at $21/share. The bond has
ABC Inc. has an outstanding convertible bond. The bond can be converted into 45 shares of companys stock currently trading at $21/share. The bond has 8 years of remaining maturity and a 5% coupon paid annually. ABCs regular bond (i.e., the debt without a conversion feature) is currently trading to yield 6%. What is the minimum price of the ABCs convertible bond?
| A. | $989.20 | |
| B. | $945.00 | |
| C. | $937.90 | |
| D. | $1,080.00 | |
| E. | $1,046.63 | |
| F. | $954.00 | |
| G. | $1,064.63 | |
| H. | $1,020.58 |
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
