Question
In 1996 Marriott International made an issue of unusual bonds called liquid yield option notes, or LYONS. The bond matured in 2011, had a zero
In 1996 Marriott International made an issue of unusual bonds called liquid yield option notes, or LYONS. The bond matured in 2011, had a zero coupon, and was issued at $541.15. It could have been converted into 8.85 shares. Beginning in 1999 the bonds could have been called by Marriott. The call price was $612.71 in 1999 and increased by 5.2% a year thereafter. Holders had an option to put the bond back to Marriott in 1999 at $612.71 and in 2006 at $873.45. At the time of issue the price of the common stock was about $50.95.
What was the yield to maturity on the bond?
Assuming that comparable nonconvertible bonds yielded 10.9%, how much were investors paying for the conversion option?
What was the conversion value of the bonds at the time of issue?
What was the initial conversion price of the bonds?
What was the conversion price in 2005?
At what price could Marriott have called the bonds in 2006?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started