The common stock is currently selling for 1050 per

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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 on equal-risk 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...
View Full Document

This document was uploaded on 01/19/2014.

Ask a homework question - tutors are online