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Question 6 Dubai Properties pic has in issue 5% convertible debt with 8 years to redemption (at par or by converting £1,000 to 9 shares). The bond can only be converted at maturity. The bonds are trading at a yield of 6.7%. Dubai Properties' shares are currently trading at £83.20 and are expected to increase in value by 6% a year over the next 8 years. The bond has just paid a coupon and there is no accrued interest to account for. The lowest value the bond can have today today is: Question 6 options: £897.30 £975.20 £902.1 £1012.46 £1109.32

Question 6 Dubai Properties pic has in issue 5% convertible debt with 8 years to redemption (at par or by converting £1,000 to 9 shares). The bond can only be converted at maturity. The bonds are trading at a yield of 6.7%. Dubai Properties' shares are currently trading at £83.20 and are expected to increase in value by 6% a year over the next 8 years. The bond has just paid a coupon and there is no accrued interest to account for. The lowest value the bond can have today today is: Question 6 options: £897.30 £975.20 £902.1 £1012.46 £1109.32

EBK CFIN
EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter6: Bonds (debt) - Characteristics And Valuation
Section: Chapter Questions
Problem 15PROB
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Question 6 Dubai Properties pic has in issue 5% convertible debt with 8 years to redemption (at par or by converting £1,000 to 9 shares). The bond can only be converted at maturity. The bonds are trading at a yield of 6.7%. Dubai Properties' shares are currently trading at £83.20 and are expected to increase in value by 6% a year over the next 8 years. The bond has just paid a coupon and there is no accrued interest to account for. The lowest value the bond can have today today is: Question 6 options: £897.30 £975.20 £902.1 £1012.46 £1109.32
Transcribed Image Text:Question 6 Dubai Properties pic has in issue 5% convertible debt with 8 years to redemption (at par or by converting £1,000 to 9 shares). The bond can only be converted at maturity. The bonds are trading at a yield of 6.7%. Dubai Properties' shares are currently trading at £83.20 and are expected to increase in value by 6% a year over the next 8 years. The bond has just paid a coupon and there is no accrued interest to account for. The lowest value the bond can have today today is: Question 6 options: £897.30 £975.20 £902.1 £1012.46 £1109.32
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