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Assume the company value today is 100$ and annual volatility 20%. To fund its operations the company issues a convertible bond with a principal of
Assume the company value today is 100$ and annual volatility 20%. To fund its operations the company issues a convertible bond with a principal of 70$. Investors can convert this bond into 3 shares of the stock after half a year or at the bond expiration a. What is the value of the bond ignoring the convertible option? b. Now estimate the bond value with the convertible feature C. Create the convertibility horizon (mark the tree nodes in which you will convert) d. What is the value of the convertibility option in your opinion? Assume the company value today is 100$ and annual volatility 20%. To fund its operations the company issues a convertible bond with a principal of 70$. Investors can convert this bond into 3 shares of the stock after half a year or at the bond expiration a. What is the value of the bond ignoring the convertible option? b. Now estimate the bond value with the convertible feature C. Create the convertibility horizon (mark the tree nodes in which you will convert) d. What is the value of the convertibility option in your opinion
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