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Unformatted text preview: The common stock is currently selling for $10.50 per share. LG3 16–10 Conversion (or stock) value Find the conversion (or stock) value for each of
the convertible bonds described in the following table. Convertible Conversion
ratio Current market
price of stock A 25 $42.25 B 16 50.00 C 20 44.00 D 5 19.50 704 PART 6 Special Topics in Managerial Finance LG4 16–11 Straight bond value Calculate the straight bond value for each of the bonds
shown in the following table. Coupon interest rate
(paid annually) Interest rate
straight bond Years to
maturity Bond Par value A $1,000 10% 14% 20 B 800 12 15 14 C 1,000 13 16 30 D 1,000 14 17 25 LG4 16–12 Determining values—Convertible bond Eastern Clock Company has an outstanding issue of convertible bonds with a $1,000 par value. These bonds are
convertible into 50 shares of common stock. They have a 10% annual coupon
interest rate and a 20-year maturity. The interest rate on a straight bond of similar risk is currently 12%.
a. Calculate the straight bond value of...
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This document was uploaded on 01/19/2014.
- Fall '13