Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) Your client is floating a convertible bond issue.

It is $100,000 convertible bond (par value $1,000). (annual) coupon rate is= 3.50%. Bond matures in 15. These are convertible to common stock at end of year 7. Client has= 11,347,500 shares of common stock outstanding, trading at= $17.52. Conversion ratio is= 40. Yield on seven-year Treasuries is= 2.10%.

There is a put option trading on client’s shares in public market with the strike price of= $20 which expires in 172 days. Present value of this put is= $2.86. This information can help determine the present implied market estimation of annualized standard deviation of stock returns (sigma) on clients stock. Yield on six-month Treasury bills is presently= 0.32%.

Client also has couple of long-term straight-bonds which trade on market, and you can evaluate the yield-to-maturity on these instruments. Bond series matures in 4 years and bears the yield of= 3.17%. Another issue matures in 8 years with a yield of= 4.76%.

Ultimately, there is issue which matures in 22 years, and these bear a yield of= 5.62%. Use this data to evaluate the suitable yield on straight-bonds issued by firm. Evaluate a reasonable value for these convertible bonds, based on information which you have collected.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M914649

Have any Question? 


Related Questions in Basic Finance

What is moral hazard why does deposit insurance inherently

What is moral hazard? Why does deposit insurance inherently involve moral hazard? What factors contribute to moral hazard on the internatinal level?

Define the various capital budgeting methods such as net

Define the various capital budgeting methods such as net present value (NPV), internal rate of return (IRR), and so on, and explain how they differ from one another. Identify which, if any, of the methods discussed might ...

A researcher is interested in determining whether there is

A researcher is interested in determining whether there is a relationship between the number of room air conditioning units sold each week and the time of year. What type of descriptive chart would be most useful in perf ...

Why is that when you increase the level of your cash the

Why is that when you increase the level of your cash the transaction cost goes down?

Why are direct financing transactions more costly or

Why are direct financing transactions more costly or inconvenient than intermidiated transactions?

David abbot is interested in purchasing a bond issued by

David Abbot is interested in purchasing a bond issued by Sony. He has obtained the following information: Par Value- $1,000 Cost- $910 Coupon interest rate- 7.5% Years to maturity: 10 Corporate tax rate- 35% a. The befor ...

Analyzing capital expendituresassume that you have received

Analyzing Capital Expenditures Assume that you have received a capital expenditure request for $52,000 for plant equipment and that you are required to do a justification analysis using capital budgeting techniques. The ...

Given the following information calculate the current value

Given the following information, calculate the current value of the stock: current dividend is $3.00, projected super normal growth for three years at 20%, growth rate after year 3 should remain constant at 11% and you w ...

Question 1nbsp a cost of living rider that you purchase as

QUESTION 1   A cost of living rider that you purchase as part of your insurance life insurance policy gives you the option to buy additional insurance coverage to compensate for inflation. True False QUESTION 2  Riders t ...

A car rental firm is currently renting 800 cars per year

A car rental firm is currently renting 800 cars per year. How many cars will the firm be renting in 10 years if the demand for car rentals is expected to increase by 7% per year?

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate