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    Convertible Bonds

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    A convertible bond has a face value of $1000, and the conversion price is $50 per share. The stock is selling at $42 per share. The bond pays $60 per year interest and is selling in the market for $930. It matures in 15 years. Market rates are 10 percent per year.

    What is the conversion rate?
    What is the conversion value?
    What is the conversion premium (in dollars and precent)?
    Waht is the floor vlure or pure bond value?

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    Solution Preview

    Convertible Bond
    A convertible bond has a face value of $1000, and the conversion price is $50 per share. The stock is selling at $42 per share. The bond pays $60 per year interest and is selling in the market for $930. It matures in 15 years. Market rates are 10 percent per year.

    Answers:
    What is the conversion rate?

    The conversion rate is also referred as conversion ratio. This is the rate at which a convertible security can be exchanged for common stock.

    The ...

    Solution Summary

    Calculation of conversion rate, conversion value, conversion premium (in dollars and precent), and the floor value or pure bond value.

    $2.19

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