similar risk bonds
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?
© BrainMass Inc. brainmass.com March 4, 2021, 5:56 pm ad1c9bdddfhttps://brainmass.com/business/options/similar-risk-bonds-19413
Solution Preview
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 ...
Solution Summary
A scenario about similar risk bonds is debated.
$2.49