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convertible bond with a ratio equal to 4 0 . The bond's face value is $ 1 , 0 0 0 . ( a )
convertible bond with a
ratio equal
to The bond's face value is $a For
how many shares of stock can a bondholder
convert each bond? b At price should
bondholders convert?
Suppose you own a convertible isond that has a
conversion ratio equal to Each convertible hond
has a face value equal to $ The int rket
value of the company's common stock is $ and
the bond is selling for $ If you want to liquidate
your position today because you need money io
pay your rent, should you sell the bond or should
you convert the bond into common stock and then
sell the stock? Explain your answer.
Lightning Electric's outstanding bond has a $
maturity value and a percent coupon rate of
interest paid semiannually The bond, which was
issued five years ago, matures in years. If inves
tors require a return equal to percent to invest in
similar bonds, what is the current market vlue of
Lightning's bond?
PART THREE: ValuationFinancial Assets
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