A convertible bond pays a 10% coupon, with semiannual payments, has a $1,000 face value, matures in 10 years, and is convertible into 40 shares of the firm's common stock. The stock is currently selling for $30 a share. If similar risk bonds are currently yielding 8%, what is the minimum price at which this bond should sell?
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The payment each period (half a year) is PMT=$1,000*10%/2 =$50
<br>The required return rate is 8% annually, or I/Y = 4% each period, with N=10*2=20 periods. Then the price for the ...
...bond sell for today? b. Describe the two possible reasons why the rate on similar-risk bonds is below the coupon interest rate on the JD Designs Inc bond. ...
... reasons why the rate on similar-risk bonds is below ... price is influenced by the risk perceptive of ... that Complex Systems bonds have higher risks than alternatives ...
... a. All else equal, a bond that has a coupon rate of 10% will sell at a discount if the required rate of return for a bond of similar risk is 8%. ...
... of a semi-annual bond maturing in 6 years, with a $1,000 par value and a coupon interest rate of 10 percent if the required return on similar-risk bonds is 14 ...
... The current yield to maturity on bonds of similar risk is 10 percent. ... The current yield to maturity on bonds of similar risk is 10 percent. ...
... b. Describe the two possible reasons why similar-risk bonds are currently earning a return below the coupon interest rate on the Complex Systems bond. ...
