d. Suppose the price of Roop's common stock fell issued to $32.75 now, 15 years after the issue date (also assume the stock price never exceeded $62.75). Assume interest rates remained constant. What is the current price of the straight-bond portion of the convertible bond? What is the current value if a bondholder converts a bond? Do you think it is likely that the bonds will be converted? Why or why not? e. The bonds originally sold for $1,000. If interest rates on A-rated bonds had remained constant at 8.75% and if the stock price had fallen to $32.75, then what do would have happened to the price of the convertible bonds? (Assume no change in the standard deviation of stock returns.) you think

d. Suppose the price of Roop's common stock fell issued to $32.75 now, 15 years after the issue date (also assume the stock price never exceeded $62.75). Assume interest rates remained constant. What is the current price of the straight-bond portion of the convertible bond? What is the current value if a bondholder converts a bond? Do you think it is likely that the bonds will be converted? Why or why not? e. The bonds originally sold for $1,000. If interest rates on A-rated bonds had remained constant at 8.75% and if the stock price had fallen to $32.75, then what do would have happened to the price of the convertible bonds? (Assume no change in the standard deviation of stock returns.) you think

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section: Chapter Questions

Problem 17P

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