Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Float a convertible bond issue. It is a $100,000 convertible bond (par value $1,000). The (annual) coupon rate is 3.50%. The bond matures in 15. These are convertible to common stock at the 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 the client's shares in a public market with a strike price of $20 that expires in 172 days. Current value of this put is $2.86. This information can help find the current implied market estimate of the annualized standard deviation of stock returns (sigma) on the clients stock. The yield on six-month Treasury bills is currently 0.32%.

The client also has a couple of long-term straight-bonds that trade on the market, and you can estimate the yield-to-maturity on these instruments. A bond series matures in 4 years and bears a yield of 3.17%. Another issue matures in 8 years with a yield of 4.76%.

Finally, there is an issue that matures in 22 years, and these bear a yield of 5.62%. Use this data to estimate an appropriate yield on straight-bonds issued by the firm. Estimate a reasonable value for these convertible bonds, based on the information that you have collected.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M939117

Have any Question? 


Related Questions in Basic Finance

Question 1 what were the responsibilities of the mortgage

Question 1: What were the responsibilities of the mortgage brokers to borrowers? To lenders? To investors? How well did they fulfill their responsibilities? Why? Question 2: Did some subprime lenders behave unethically? ...

Both a call and a put currently are traded on stock xyz

Both a call and a put currently are traded on stock XYZ; both have strike prices of $50 and expiration's of 6 months. What will be the profit to an investor who buys the call for $4 in the following scenarios for stock p ...

Question 1finance has its origins ina economics and

Question 1 Finance has its origins in: a. economics and statistics b. accounting and sociology c. accounting and economics d. psychology and mathematics Question 2 Successful businesses typically progress through a serie ...

No plagiarism pleasethe sarbanes-oxley act of 2002 sox was

No Plagiarism please The Sarbanes-Oxley Act of 2002 (SOX) was passed as the result of the Enron scandal and other instances of accounting fraud. This act was passed to strengthen the role of the Securities and Exchange C ...

Influence of money market activity on working capital

Influence of Money Market Activity on Working Capital : Assume that interest rates for most maturities are unusually high. Also, assume that the net working capital (defined as current assets minus current liabilities) l ...

After examining given figure explain the potential link

After examining given Figure, explain the potential link between innovations in financial markets and output volatility since the 1980s. You should consider both the "Great Moderation" and the recession of 2007-2009 in y ...

True or falsetrue or false dividends are irrelevanttrue or

True or False True or False: Dividends are irrelevant True or False: Dividend policy is irrelevant It is important to understand that the only thing that can make dividend policy relevant is if there is some market imper ...

Question 1jessica opened a bank account with an initial

Question 1: Jessica opened a bank account with an initial deposit of $10,000. The bank account pays monthly interests at 6% p.a. convertible monthly. (a) How much will Jessica accumulate in 5 years if she is not going to ...

Suppose that a certain college class contains

Suppose that a certain college class contains 40 students. Of these 26 are juniors, 27 are history majors, and 10 are neither. A student is selected at random from the class. (a) What is the probability that the student ...

Finance assignmentdo the following problems1assume the hong

Finance Assignment Do the following problems 1. Assume the Hong Kong dollar (HK$) value is tied to the U.S. dollar and will remain tied to the U.S. dollar. Assume that interest rate parity exists. Today, an Australian do ...

  • 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