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Consider the following hypothetical convertible bond:

Par Value = $1,000

Coupon Rate = 9.5%

Market Price of convertible bond = $1,000

Conversion ratio = 37.383

Estimated straight value of bond = $510

Yield to maturity of the straight bond = 18.7%

Assume that the price of the common stock is $23 and that the dividend per share is $0.75 per year.

Calculate each of the following:

Conversion value

Market conversion price

Conversion premium per share

Conversion premium ratio

Premium over straight value

Premium payback period

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91619499

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