Question
help needed - Thanks in advance Suppose James LLC issued a convertible (non-callable) bond with an annual coupon of 10% that matures in 5 years.The
help needed - Thanks in advance
Suppose James LLC issued a convertible (non-callable) bond with an annual coupon of 10% that matures in 5 years.The conversion ratio is 26.32 shares of stock per bond and James's LLC stock is currently trading at $30 per share. The convertible bond is priced at $900 in the market and the appropriate discount rate is 13%.
- What is the Straight Bond Value of this convertible?
- What is the Option Value of the Bond?
- What is the Conversion Value of the Bond?
- Based solely on today's values, should you convert?
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Foundations Of Finance
Authors: Arthur J Keown, John D Martin, J William Petty
7th Edition
0133370356, 9780133370355
