Question
The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2007. Each bond has the following features. Face Value $1,000 Conversion
The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2007. Each bond has the following features.
Face Value $1,000 Conversion price $25 Current call price 105 (percent of face value) Current trading price 130 (percent of face value) Maturity 2017 Current stock price $30 (per share) Interest rate 10% (coupon as percent of face value)
a. What is the bonds conversion value? b. Can you explain why the bond is selling above conversion value? c. Should Surplus call? What will happen if it does so?
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
Fundamentals Of Corporate Finance
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
5th Edition
1119795435, 978-1119795438
