Dragon Corporation has three types of debt outstanding, even though it has plenty of cash. Coupons are paid on March 1. Bond P is 10-year, 8% coupon, $1000 face value straight debt. Bond Q is 10-year, 8% coupon, $1000 face value debt, convertible into 20 shares on March 2, 2025. Bond R is 10-year, 8% coupon, $1000 face value debt, callable at 110 on March 2, 2025. Suppose, on March 2, 2025: Bond P has price 108; Dragon share price is 55. what is the quoted price of Bond Q?

Dragon Corporation has three types of debt outstanding, even though it has plenty of cash. Coupons are paid on March 1. Bond P is 10-year, 8% coupon, $1000 face value straight debt. Bond Q is 10-year, 8% coupon, $1000 face value debt, convertible into 20 shares on March 2, 2025. Bond R is 10-year, 8% coupon, $1000 face value debt, callable at 110 on March 2, 2025. Suppose, on March 2, 2025: Bond P has price 108; Dragon share price is 55. what is the quoted price of Bond Q?

EBK CFIN

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ISBN:9781337671743

Author:BESLEY

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Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 8PROB

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Question

Part IV. Dragon Corporation bonds
Dragon Corporation has three types of debt outstanding, even though it has plenty of
cash. Coupons are paid on March 1.
Bond P is 10-year, 8% coupon, $1000 face value straight debt.
Bond Q is 10-year, 8% coupon, $1000 face value debt, convertible into 20 shares on
March 2, 2025.
Bond R is 10-year, 8% coupon, $1000 face value debt, callable at 110 on March 2,
2025.
Suppose, on March 2, 2025: Bond P has price 108; Dragon share price is 55.
what is the quoted price of Bond Q?

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