Question
Problem 24-11 Calculating Values for Convertibles [LO6] You have been hired to value a new 20-year callable, convertible bond. The bond has a coupon rate
Problem 24-11 Calculating Values for Convertibles [LO6]
| You have been hired to value a new 20-year callable, convertible bond. The bond has a coupon rate of 2.8 percent, payable semiannually, and its face value is $1,000. The conversion price is $59, and the stock currently sells for $46. |
| a. | What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 3 percent. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | What is the conversion premium for this bond? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
