investment
A certain 6
6% annual coupon rate convertible bond (maturing in 20 years) is convertible at the holder’s option into 20
20 shares of common stock. The bond is currently trading at $800
800. The stock (which pays 83
83¢ a share in annual dividends) is currently priced in the market at $32.85
32.85 a share.
a. What is the bond’s conversion price?
b. What is its conversion ratio?
c. What is the conversion value of this issue? What is its conversion parity?
d. What is the conversion premium, in dollars and as a percentage?
e. What is the bond’s payback period?
f. If comparably rated, nonconvertible bonds sell to yield 8 % comma
8%, what is the investment value of the convertible?
a. The bond’s conversion price is $
(Round to the nearest cent.)
b. The conversion ratio is
(Round to the nearest integer.)
c. The conversion value of this issue is $
(Round to the nearest cent.)
The conversion parity of this issue is $
(Round to the nearest cent.)
d. The conversion premium in dollars is $
(Round to the nearest cent.)
The conversion premium as a percentage is
(Round to two decimal places.)
e. The bond’s payback period is
(Round to one decimal place.)
f. The investment value of the convertible is $
nothing
.(Round to the nearest cent.)
Enter your answer in each of the answer boxes.
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