Craig's Cake Company has an outstanding issue of 13-year convertible bonds with a $800 par value. These bonds are convertible into 70 shares of common stock. They have a 12% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%. a. Calculate the straight bond value of this bond. $629.05 b. Calculate the conversion (or stock) value of the bond when the market price is $23 per share of common stock. $1,610 c. What is the minimum market value of the bond? $ ? (Round to the nearest cent)

Craig's Cake Company has an outstanding issue of 13-year convertible bonds with a $800 par value. These bonds are convertible into 70 shares of common stock. They have a 12% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%. a. Calculate the straight bond value of this bond. $629.05 b. Calculate the conversion (or stock) value of the bond when the market price is $23 per share of common stock. $1,610 c. What is the minimum market value of the bond? $ ? (Round to the nearest cent)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 14P

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