Explore BrainMass

Explore BrainMass

    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 June 3, 2020, 10:07 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

    ADVERTISEMENT