Quiz _5 - = 117 * (1/1.1) = $ 106.36 G. Value of the...

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FIN 459-659 Introduction to Derivatives Quiz #5 Answer Key 1. C 2. D 3. C 4. C 5. B 6. C 7. C 8. C 9. C 10. C 11. A B 12. B 13. C 14. A. Parity Value = (Face Value/Exchange Price)*Stock Price = 30*25 = $ 750 B. Investment Value = (50/1.06) + (50/(1.06^2)) + (1050/(1.06^3)) = 47.17 + 44.5 + 881.6 = $ 973.27 C. Conversion Ratio = Face Value/Exchange Price = 1000/33.33
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FIN 459-659 = 30 D. Strike Price @ Issue = Investment Value/Conversion Ratio = 973.27/30 = $ 32.44 E. Total Value of Convertible Option before dilution = Conversion Ratio * C = 30 * 3.9 = $ 117 F. Total Value of Convertible Option after dilution = Total Value of Convertible Option before dilution * (1/(1+dilution factor))
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Unformatted text preview: = 117 * (1/1.1) = $ 106.36 G. Value of the Convertible = Investment Value + Total Value of Convertible Option after dilution = 973.27 + 106.36 = $ 1079.63 H. Conversion Premium = (Value of Convertible Parity Value)/Parity Value = (1079.63 750)/750 = 43.95% Additional Calculations to derive some of the answers: { . +( . + . ln2532 44 0 025 0 092 )*3} (0.3 * 3 ) = (-0.2605 + 0.21) 0.5196 = -0.05052 0.5196 = -.09722 D2 = D1 (0.3 * 3 ) = -.09722 0.5196 = -0.61682 = -0.4146 FIN 459-659 C = (0.5398 * 25) ( .-. * 32 44 e 05 3 *0.3446) = 13.495 9.62 = 3.9...
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This note was uploaded on 02/09/2010 for the course FIN 459 taught by Professor Yildary during the Spring '07 term at Syracuse.

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Quiz _5 - = 117 * (1/1.1) = $ 106.36 G. Value of the...

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