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# Laser Electronics Company

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Laser Electronics Company has \$30 million in 8 percent convertible bonds outstanding. The conversion ratio is 50; the stock price is \$17; and the bond matures in 15 years. The bonds are currently selling at a conversion premium of \$60 over their conversion value.

If the price of the common stock rises to \$23 on this date next year, what would your rate of return be if you bought a convertible bond today and sold it in one year? Assume on this date next year, the conversion premium has shrunk from \$60 to \$10.

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Laser Electronics Company has \$30 million in 8 percent convertible bonds outstanding. The conversion ratio is 50; the stock price is \$17; and the bond matures in 15 years. The bonds are currently selling at a conversion premium of \$60 over their conversion value.

If ...

#### Solution Summary

This solution is comprised of a detailed explanation to answer what would your rate of return be if you bought a convertible bond today and sold it in one year if the price of the common stock rises to \$23 on this date next year.

\$2.49