Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
11th Edition
ISBN: 9780077861759
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 24, Problem 8QP
Convertible Bonds You own a callable, convertible bond with a conversion ratio of 25.18. The stock is currently selling for $47 per share. The issuer of the bond has announced a call at a call price of 110. What are your options here? What should you do?
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You own a convertible bond with a conversion ratio of 20. The stock is currently selling for $72 per share. The issuer of the bond has announced a call with a call price of 108. What are your options here? What should you do?
A convertible bond has the following features:
Principal $1,000
Maturity date 25 years
Interest $80 (8% Coupon)
Call price $1,060
Exercise price $55 a share
a.) The bond may be converted into how many shares?
b.) If comparable non-convertible debt offered an annual yield of 12% what would be the value of this bond as debt?
c.) If the stock were selling for $49.50, what is the value of the bond in terms of stock?
A convertible bond has a par value of $1,000 and a conversion price of $40. The stock currently trades for $30 a share. What are the bond's conversion ratio and conversion value at t=0? (CR = 25; P (CR) = $30 x 25 = $750)
Chapter 24 Solutions
Corporate Finance (The Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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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- A convertible bond has a par value of $1,000 and a conversion priceof $25. The stock currently trades for $22 a share. What are thebond’s conversion ratio and conversion value at t= 0? (40, $880)arrow_forwardGiven the following information concerning a convertible bond: Principle: $1,000 Coupons: 5 percent Maturity: 15 years Call Price: $1,050 Conversion price: $37 (i.e., 27 shares) Market Price of the Bond: $1040 Common stock: $30 G. What is the probability that the corporation will call this bond? H. Why are investors willing to pay the premiums mentioned in questions d and f? (D, What is the premium in terms of stock that the investor pays when he or she purchases the convertible bond instead of the stock? F,What is the premium in terms of debt that the investor pays when he or she purchases the convertible bond instead of a nonconvertible bond?) (dont need D and F answers only G. and H. need help with please dont put in excel i dontunderstand that stuff yet equations and worded answers please)arrow_forwardA convertible bond has a par value of $1,000, but its current market price is at $975. The current price of the issuing company's stock is $26, and the conversion ratio is 34 shares. What is the bond's market conversion value?arrow_forward
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