2008 Final Exam Solution_Tsing Hua_2008

# 2008 Final Exam Solution_Tsing Hua_2008 - 2008 Corporate...

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2008 Corporate Finance Student Name: Student ID Number: Use pen (NO pencil)! 1. B 2. C 3. B 4. E 5. B 6. B 7. B 8. C 9. C 10. C 11. D 12. A 13. B 14. A 15. A 16. C 17. D 18. C 19. E 20. C 21. C 22. B 23. C 24. B 25. B 26. D 27. A 28. B 29. A 30. B 31. A 32. E 33. D 34. E 35. C 36. E 37. B 38. C 39. E 40. A Short Essay 1. Suppose that the 150 units 12-month zero-coupon debt with face value \$1000 have no conversion rights. What is the bond’s price today? Use BS formula and get E t =19803.0436. The bond’s price today is 125,000-19803.0436=105196.9564, so each bond is worth 105.197 0.08*1 01 2 0 1 1 21 2 ( ) ( ) 125000*0.5181 150000 *0.3247=19803.0436 2 ln( / ) ( / 2) ln(125000/150000) (0.08 0.5*0.5/ 2)1 where 0.0454 0.5 1 ( )=0.5181 -0.4546, ( ) 0.3247 rT cSN d K eN d e SK r T d T Nd dd T N d σ −− =− = ++ == = = =

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2008 Corporate Finance What is the convertible bond’s price today If the bonds are converted at maturity, the number of shares outstanding will be 1000+150*40=7000, and the value of the 150 bonds is thus A t 150*40/7000=6/7A t. If A t is less than 150,000, and 6/7A t is less than 150,000, then the bonds are not converted. If A t is greater than 150,000, and 6/7A t is greater than 150,000, then the bonds will be converted, ie., A t is greater than 175,000, then convert.
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2008 Final Exam Solution_Tsing Hua_2008 - 2008 Corporate...

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