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Better beta Inc. has a convertible bond issue currently selling in the market for $840. Each bond is exchangeable for 50 shares of Better Beta
Better beta Inc. has a convertible bond issue currently selling in the market for $840. Each bond is exchangeable for 50 shares of Better Beta common stock.
The convertible bond has an 8 percent coupon. Similar non-convertible bonds are priced to yield 12 percent. The bond matures in eight years. Stock in Better Beta Sells for $16 per share.
Required:
(SHOW ALL CALCULATIONS)
a) What is the conversation ratio, and the conversion price?
b) What is the minimum price that the bond will sell for?
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