EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 20, Problem 3CP
a.
Summary Introduction
To calculate: The conversion value for the bond with the help of given information.
Introduction:
Conversion value: It is that price for the bond to convertible into other asset values. This price is convertible in nature.
b.
Summary Introduction
To calculate: The market conversion price for the bond with the given information.
Introduction:
Market conversion
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Students have asked these similar questions
Flika Company has an issue of convertible bonds with a $1,000 par value. The bonds have a 10 percent coupon rate, have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 11 percent and the market price of the firm's common stock is currently $9.00. Based on this information,
a)What is the conversion value of this bond if it is selling at $970.
b)What is its pure bond value?
c)What is its conversion premium?
Use the following information for the next three problems.
Floppy Company has an issue of convertible bonds with a $1,000 par value. Floppy’s bonds have a 10 percent coupon rate. They have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 11 percent and the market price of the firm's common stock is currently $9.00. Based on this information,
What is the conversion value of Floppy’s bond if it is selling at $970.
What is its pure bond value?
What is its conversion premium?
Matthews Technology has a $1,000 par value, 20 year convertible bond outstanding with a 10% coupon rate that can be converted into 25 shares of common stock. The common stock is currently selling for $34.00 a share. The convertible bond is selling for $30 more than the conversion value. A competitive, 20 year nonconvertible bond of the same risk class has a 12% annual coupon rate.
What is the number of common shares to which the convertible bond can be converted to (Conversion ratio)? Round to the nearest share.
Compute the conversion price? Round to 2 decimal places.
Compute the conversion value? Round to 2 decimal places.
Compute the conversion premium? Round to 2 decimal places.
Compute the current selling price of the convertible bond? Round to 2 decimal places.
Compute the pure bond value? Round to 2 decimal places.
If the common share price goes down to $31.50 and the conversion premium goes up…
Chapter 20 Solutions
EBK INVESTMENTS
Ch. 20 - Prob. 1PSCh. 20 - Prob. 2PSCh. 20 - Prob. 3PSCh. 20 - Prob. 4PSCh. 20 - Prob. 5PSCh. 20 - Prob. 6PSCh. 20 - Prob. 7PSCh. 20 - Prob. 8PSCh. 20 - Prob. 9PSCh. 20 - Prob. 10PS
Ch. 20 - Prob. 11PSCh. 20 - Prob. 12PSCh. 20 - Prob. 13PSCh. 20 - Prob. 14PSCh. 20 - Prob. 15PSCh. 20 - Prob. 16PSCh. 20 - Prob. 17PSCh. 20 - Prob. 18PSCh. 20 - Prob. 19PSCh. 20 - Prob. 20PSCh. 20 - Prob. 21PSCh. 20 - Prob. 22PSCh. 20 - Prob. 23PSCh. 20 - Prob. 24PSCh. 20 - Prob. 25PSCh. 20 - Prob. 26PSCh. 20 - Prob. 27PSCh. 20 - Prob. 28PSCh. 20 - Prob. 29PSCh. 20 - Prob. 30PSCh. 20 - Prob. 31PSCh. 20 - Prob. 1CPCh. 20 - Prob. 2CPCh. 20 - Prob. 3CPCh. 20 - Prob. 4CPCh. 20 - Prob. 5CP
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