Question
Toys R Us has the following convertible bond outstanding: Coupon: 5 percent; Principal: $1,000; Maturity: 20 years: Conversion Price: $10; Call Price: $1,000 Plus one
Toys R Us has the following convertible bond outstanding:
Coupon: 5 percent; Principal: $1,000; Maturity: 20 years:
Conversion Price: $10; Call Price: $1,000 Plus one years interest.
Comparable nonconvertible bonds yield 8 percent. Toys R Us stock is selling for $15 and pays no dividend. (10 points)
- If the bond were selling for $1,350, what would you do?
- If the bond were selling for $1,523, is there any reason to expect that Toys R Us will currently call the bond?
- If the bond is called and you do not convert, what do you receive?
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: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
0135811600, 978-0135811603
