UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Chapter 24, Problem 4QP
Convertible Bonds Hannon Home Products, Inc., recently issued $2 million worth of 3 percent convertible debentures. Each convertible bond has a face value of $1,000. Each convertible bond can be converted into 23.50 shares of common stock anytime before maturity. The stock price is $34.65, and the market
- a. What is the conversion ratio?
- b. What is the conversion price?
- c. What is the conversion premium?
- d. What is the conversion value?
- e. If the stock price increases by $2, what is the new conversion value?
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The bonds of Goniff Bank & Trust have a conversion premium of $34. Their conversion price is $25. The common stock price is $19.50.
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Here are data on $1,000 par value bonds issued by Microsoft, GE Capital, and Morgan Stanley Assume you are thinking about buying these bonds Answer the following questions
a. Assuming interest is paid annually, calculate the values of the bonds if your required rates of return are as follows Microsoft, 7 percent, GE Capital, 15 percent, and Morgan Stanley 10 percent where 0
b. The bonds are selling for the following amounts
Microsoft
GE Capital
Morgan Stanley $850
$738
$561
What are the expected rates of return for each bond?
c. How would the value of the bonds change it (1) your required rate of notumn (r) increased 2 percentage points or (2) decreased 2 percentage points?
d. Explain the implications of your answers in part (c) in terms of interest rate nsk, premium bonds, and discount bonds
e. Should you buy the bonds? Explain
a. If your required rate of return on the Microsoft bond is 7 percent, what is the value of the bond?
(Round to the nearest cont)
Review
Coupon interest rate…
Whiston Securities recently issued convertible bonds with a $1,000 parvalue. The bonds have a conversion price of $20 per share. What is the bonds’ conversionratio, CR?
Chapter 24 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 24 - Prob. 1CQCh. 24 - Prob. 2CQCh. 24 - Convertible Bonds and Stock Volatility Suppose you...Ch. 24 - Convertible Bond Value What happens to the price...Ch. 24 - Prob. 5CQCh. 24 - Warrants and Convertibles What is wrong with the...Ch. 24 - Warrants and Convertibles Why do firms issue...Ch. 24 - Convertible Bonds Why will convertible bonds not...Ch. 24 - Convertible Bonds When should a firm force...Ch. 24 - Conversion Price A convertible bond with a par...
Ch. 24 - Conversion Ratio A convertible bond with a par...Ch. 24 - Conversion Premium Eckely, Inc., recently issued...Ch. 24 - Convertible Bonds Hannon Home Products, Inc.,...Ch. 24 - Prob. 5QPCh. 24 - Convertible Bond Value An analyst has recently...Ch. 24 - Convertible Bond Value Sportime Fitness Center,...Ch. 24 - Convertible Bonds You own a callable, convertible...Ch. 24 - Prob. 9QPCh. 24 - Convertible Bonds Vital Silence Corp. bas just...Ch. 24 - Convertible Bonds Rob Stevens is the chief...Ch. 24 - Prob. 12QPCh. 24 - Prob. 13QPCh. 24 - Prob. 14QPCh. 24 - Warrant Value Superior Clamps, Inc., has a capital...Ch. 24 - Prob. 16QPCh. 24 - SS AIR'S CONVERTIBLE BOND Chris Guthrie was...Ch. 24 - What is the floor value of the SS Air convertible...Ch. 24 - What is the conversion ratio of the bond?Ch. 24 - What is the conversion premium of the bond?Ch. 24 - What is the value of the option?Ch. 24 - Is there anything wrong with Todds argument that...Ch. 24 - Is there anything wrong with Marks argument that a...Ch. 24 - Prob. 8MCCh. 24 - During the debate, a question comes up concerning...
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