INVESTMENTS (LL)
11th Edition
ISBN: 9781260150407
Author: Bodie
Publisher: MCG
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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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Calculate the market conversion price for a convertible bond with par value of $4000, coupon rate of 5%, market price of $4000, a conversion ratio of 16, and current stock price of $202.
1. Assuming, the issuing company pays an annual dividend of $12 per share, what is the favorable income differential (yield advantage) per share for this bond?
2. Calculate the premium payback period for this bond.
A bond has a face value of $100 and a conversion ratio of 25. What is a good time to convert to equity for bond holders given the following stock price?
A) $0.3
B) $3
C) $5
D) $4
The Excel file Portfolio Bond Immunization Data contains information about three bonds. Use this data to:
Yield to maturity (Expected/Current)
9%
Number of Years to Future Liability
9.00
Future Liability
$7,500
Bond 1
Bond 2
Bond 3
Coupon rate
6.00%
7.000%
8.00%
Maturity
12
18
24
Face value
1,000
1,000
1,000
Compute the amount to be invested to meet the future liability noted in the data. This future liability is due in 9 years.
Find a combination of Bond 1 and Bond 2 having a target duration of 9 years.
Find a combination of Bond 1 and Bond 3 having a target duration of 9 years.
Perform an analysis using a data table and an accompanying graph to determine which portfolio would be preferred to attempt to immunize this obligation.
Construct a data table by varying the yield to maturity that shows the value of each portfolio at the end of 9 years.
Based on your data table, construct a graph that demonstrates the performance of these…
Chapter 20 Solutions
INVESTMENTS (LL)
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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