Fifteen years ago, Roop Industries sold $$400$ million of convertible bonds. The bonds had a $40-$year maturity, a $5\mathrm{.}75\%$ coupon rate, and paid interest annually. They were sold at their $$1,000$ par value. The conversion price was set at $$64\mathrm{.}45,$ and the common stock price was $$55$ per share. The bonds were subordinated debentures and were given an A rating; straight nonconvertible debentures of the same quality yielded about $8\mathrm{.}75\%$ at the time Roop's bonds were issued.$*$ Calculate the premium on the bonds that is$,$ the percentage excess of the conversion price over the stock price at the time of issue. Do not round intermediate calculations. Round your answer to two decimal places$\mathrm{.}17\mathrm{.}18\%*$ What is Roop's annual before$-$tax interest savings on the convertible issue versus a straight$-$debt issue? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $$25,500,000$ should be entered as $25\mathrm{.}5.$ Round your answer to two decimal places.$$12\mathrm{.}00$million per year$*$ At the time the bonds were issued, what was the value per bond of the conversion feature? Do not round intermediate calculations. Round your answer to the nearest cent.$$$per bond $*$ Suppose the price of Roop's common stock fell from $$55$ on the day the bonds were issued to $$31\mathrm{.}50$ now, $15$ years after the issue date $($also assume the stock price never exceeded $$64\mathrm{.}45).$ Assume interest rates remained constant. What is the current price of the straight$-$bond portion of the convertible bond? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive number.$$$ What is the current value if a bondholder converts a bond? Do not round intermediate calculations. Round your answer to the nearest cent.$$$ per share Do you think it is likely that the bonds will be converted? Why or why not? I. Investors would not wish to convert the bond under any circumstances.II$.$ Yes, investors would wish to convert the bond because the value in conversion is more than the value as a bond.$>$ III. No$,$ investors would not wish to convert the bond because the value in conversion is less than the value as a bond.$-$Select$-$IIIIII $*$ The bonds originally sold for $$1,000.$ If interest rates on A$-$rated bonds had remained constant at $8\mathrm{.}75\%$ and if the stock price had fallen to $$31\mathrm{.}50,$ then what do you think would have happened to the price of the convertible bonds? $($Assume no change in the standard deviation of stock returns.$)$ Round your answers to the nearest cent. Enter all amounts as a positive number.The value of straight bond would have $-$Select$-$decreasedincreased from $$$ at the time of issue to $$$ fifteen years later.$*$ Now suppose that the price of Roop's common stock had fallen from $$55$ on the day the bonds were issued to $$31\mathrm{.}50$ at present, $15$ years after the issue. Suppose also that the interest rate on similar straight debt had fallen from $8\mathrm{.}75\%$ to $5\mathrm{.}75\%.$ Under these conditions, what is the current price of the straight$-$bond portion of the convertible bond? Do not round intermediate calculations. Round your answer to the nearest dollar. Enter all amounts as a positive number.$$1000$ per bond What is the current value if a bondholder converts a bond? Do not round intermediate calculations. Round your answer to the nearest cent.$$$ per share What do you think would have happened to the price of the bonds? $-$Select$-$The price of the bonds will be slightly more than $$1,000.$The price of the bonds will be slightly less than $$1,000.$The price of the bonds will not change.

Convertible Bond Analysis

$$ answer to two decimal places.

$ $$ million per year

c$.$ At the time the bonds were issued, what was the value per bond of the conversion feature? Do not round intermediate calculations. Round your answer to the nearest cent.

$ $$ per bond of the straight$-$bond portion of the convertible bond? Do not round intermediate calculations. Round your answer to the nearest cent. Enter your answer as a positive number.

$ $$ What is the current value if a bondholder converts a bond? Do not round intermediate calculations. Round your answer to the nearest cent.

$ $$ per share

Do you think it is likely that the bonds will be converted? Why or why not?

I. Investors would not wish to convert the bond under any circumstances.

$8$ standard deviation of stock returns.$)$ Round your answers to the nearest cent. Enter all amounts as a positive number.

The value of straight bond would have $$ from $ $$ at the time of issue to $ $$ fifteen years later.

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