A calculate the straight bond value of the bond b

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Unformatted text preview: the bond. b. Calculate the conversion (or stock) value of the bond when the market price of the common stock is $15, $20, $23, $30, and $45 per share. c. For each of the stock prices given in part b, at what price would you expect the bond to sell? Why? d. What is the least you would expect the bond to sell for, regardless of the common stock price behavior? LG4 16–13 Determining values—Convertible bond Craig’s Cake Company has an outstanding issue of 15-year convertible bonds with a $1,000 par value. These bonds are convertible into 80 shares of common stock. They have a 13% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%. a. Calculate the straight bond value of this bond. b. Calculate the conversion (or stock) value of the bond when the market price is $9, $12, $13, $15, and $20 per share of common stock. c. For each of the common stock prices given in part b, at what price would you expect the bond to sell? Why? d. Graph the straight value...
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This document was uploaded on 01/19/2014.

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