investment

vertical and horizontal analysis
June 28, 2019
current yield
June 28, 2019

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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