Zippy corporation just sold 30 million of convertible bonds, Ask an Expert

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Zippy Corporation just sold $30 million of convertible bonds with a conversion ratio of 40. Each $1,000 bond is convertible into 25 shares of Zippy’s stock.

a. What is the conversion price of Zippy’s stock?

b. If the current price of Zippy’s stock is $15 and the Company’s annual stock return is normally distributed with a standard deviation of $5, what is the probability that investors will find it attractive to convert the bond into Zippy stock in the next year?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92854894

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