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Convertible bond pricing and valuation Cineplex convertible bond maturing in 2025 pays 5.75% annual coupon, can convert anytime into 90 common shares of Cineplex Inc.
Convertible bond pricing and valuation
Cineplex convertible bond maturing in 2025 pays 5.75% annual coupon, can convert anytime into 90 common shares of Cineplex Inc. The recent price quote of the bond is 101. Cineplex shares are currently trading at $7 per share and do not pay dividends. 1. What is the convertible bond price? 2. What is the conversion value of the bond? 3. What is the conversion price of the stock (conversion parity)? 4. What is the conversion premium, in dollars and as a percentage? 5. If the couple buys this bond, can they get the conversion premium paid back before maturity based on the current stock price and why? 6. If comparably rated nonconvertible bonds sell to yield 3%, what is the investment value of the convertibleStep by Step Solution
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