Explore BrainMass
Share

A convertible bond

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

12) A convertible bond has an 7% annual coupon and 10 years to maturity. The face value is $1,000 and the conversion ratio is 35. The stock currently sells for $27.375 per share. Similar nonconvertible bonds are priced to yield 9%. The value of the convertible bond is at least:

13) A convertible bond is selling for $800. It has 10 years to maturity, a $1,000 face value, and a 10% coupon. Similar nonconvertible bonds are priced to yield 14%. The conversion price is $50 per share. The stock currently sells for $31.375 per share. The conversion premium is:

© BrainMass Inc. brainmass.com March 21, 2019, 5:18 pm ad1c9bdddf
https://brainmass.com/business/convertible-bonds/a-convertible-bond-216301

Solution Preview

Master's finance class
12) A convertible bond has an 7% annual coupon and 10 years to maturity. The face value is $1,000 and the conversion ratio is 35. The stock currently sells for $27.375 per share. Similar nonconvertible bonds are priced to yield 9%. The value of the convertible bond is at least: ...

Solution Summary

This solution is comprised of a detailed explanation to answer what is the value of the convertible bond and what is the conversion premium.

$2.19