only Question B.C

Group Discussion Question 10.2 Consider the convertible bond by Miser Electronics: Par value = $1,000 Coupon rate = 8.5% Market price of convertible bond = $900 Conversion ratio = 30 Estimated straight value of bond = $700 Assume that the price of Miser Electronics common stock is $25 and that the dividend per share is $1 per annum. Group Discussion Question 10.2 Calculate each of the following: 3 4 Conversion value Market conversion price Conversion premium per share Conversion premium ratio Premium over straight value Favorable income differential per share Premium payback period Group Discussion Question 10.2 Suppose that the price of the common stock of Miser Electronics increases from $25 to $54. What will be the approximate rate of return realized from investing in the convertible bond if an investor had purchased the convertible for $900? What would be the rate of return realized if $25 had been invested in the common stock? C Suppose that the price of the common stock declines from $25 to $10. What will be the approximate rate of return realized from investing in the convertible bond if an investor had purchase the convertible for $900 and the straight value does not change? What would be the rate of return realized if $25 had been invested in the common stock