The firm you are analyzing has $90 million in face value of convertible debt with a stated interest rate of 7%, a 10-year maturity and a market value of $110 million. If the firm has a bond rating of A and the interest rate on A-rated straight bond is 8%, how much should you adjust Debt by? Equity?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The firm you are analyzing has $90 million in face value of convertible debt with a stated interest rate of 7%, a 10-year maturity and a market value of $110 million. If the
firm has a bond rating of A and the interest rate on A - rated straight bond is 8%, how much should you adjust Debt by ? Equity?
Transcribed Image Text:The firm you are analyzing has $90 million in face value of convertible debt with a stated interest rate of 7%, a 10-year maturity and a market value of $110 million. If the firm has a bond rating of A and the interest rate on A - rated straight bond is 8%, how much should you adjust Debt by ? Equity?
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