Calculating conversion or stock value of convertible bond.
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What is the conversion (or stock) value of each of the following convertible bonds?
a. A $1,000-par-value bond that is convertible into 25 shares of common stock.The common stock is currently selling for $50 per share.
b. A $1,000-par-value bond that is convertible into 12.5 shares of common stock. The common stock is currently selling for $42 per share.
c. A $1,000-par-value bond that is convertible into 100 shares of common stock. The common stock is currently selling for $10.50 per share.
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Solution:
a.A $1,000-par-value bond that is convertible into 25 shares of common stock.The common stock is currently selling for $50 per share.
Conversion ratio=25
Market price of ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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