20-year, 10% annual coupon, callable convertible bond will sell at its $1,000 par value; straight-debt issue would require a 12% coupon. Call the bonds when conversion value > $1,200. Po = $10; Do = $0.74; g = 10%. Conversion ratio = CR = 80 shares. What is the floor value at year 5? A$864 B)$1250 C) $1288 D) $1195 E) $1550 O A OB OC OD O E

20-year, 10% annual coupon, callable convertible bond will sell at its $1,000 par value; straight-debt issue would require a 12% coupon. Call the bonds when conversion value > $1,200. Po = $10; Do = $0.74; g = 10%. Conversion ratio = CR = 80 shares. What is the floor value at year 5? A$864 B)$1250 C) $1288 D) $1195 E) $1550 O A OB OC OD O E

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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What must be the price of a $1,000 bond with a 5.8% coupon rate, annual coupons, and 15 years to maturity if YTM is 10.5% APR? O A. $652.49 OB. $913.49 O C. $521.99 O D. $782.99
A firm's bonds have a maturity of 10 years with a $1,000 face value, have an 11% semiannual coupon, are callable in 5 years at $1,176.07, and currently sell at a price of $1,316.84. What are their nominal yield to maturity and their nominal yield to call? Do not round intermediate calculations. Round your answers to two decimal places. YTM: % -Select- v YTC: What return should investors expect to earn on these bonds? I. Investors would expect the bonds to be called and to earn the YTC because the YTC is greater than the YTM. II. Investors would not expect the bonds to be called and to earn the YTM because the YTM is greater than the YTC. III. Investors would not expect the bonds to be called and to earn the YTM because the YTM is less than the YTC. IV. Investors would expect the bonds to be called and to earn the YTC because the YTC is less than the YTM. %
A convertible bond has the following features: Principal $1,000 Maturity date 25 years Interest $80 (8% Coupon) Call price $1,060 Exercise price $55 a share a.) The bond may be converted into how many shares? b.) If comparable non-convertible debt offered an annual yield of 12% what would be the value of this bond as debt? c.) If the stock were selling for $49.50, what is the value of the bond in terms of stock?
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Given the following information concerning a convertible bonds: Principal $1,000 Coupon 5% Maturity 15 years Call price $1,050 Conversion price $37 (i.e., 27 shares) Market price of the common stock $32 Market price of the bond $1,040 F. What is the premium in terms of debt that the investor pays when he or she purchases the convertible bond instead of a nonconvertible bond? G. If the price of the common stock should double, would the price of the convertible bond double? Briefly explain your answer? H. If the price of the common stock should decline by 50 percent, would the price of the convertible bond decline by the same percentage? Briefly explain your answer. I. What is the probability that the corporation will call this bond? J. Why are investors willing to pay the premiums mentioned in parts (d) and (f)
Required: A bond has a par value of $1,000, a time to maturity of 20 years, and a coupon rate of 7.30% with interest paid annually. If the current market price is $730, what will be the approximate capital gain of this bond over the next year if its yield to maturity remains unchanged? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Capital gain
A corporate bond sells for $990 currently. It has a 6-year maturity, an annual coupon of $75, and a par value of $1,000. What is their capital gains yield? 8.11% 0.14% 9.47% 0.13%
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What must be the price of a $2,000 bond with a 5.8% coupon rate, annual coupons, and 30 years to maturity if YTM is 9.9% APR? O A. $976.40 В. $1,708.70 С. $1,464.60 D. $1,220.50
A firm raises capital by selling $10,000 worth of debt with flotation costs equal to 2% of its par value. If the debt matures in 10 years and has an annual coupon interest rate of 11%, what is the bond's YTM? Question content area bottom Part 1 The bond's YTM is enter your response here%. (Round to two decimal places.)
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What is the yield to maturity (YTM) of a semiannual corporate bond with 13 years to maturity, a coupon rate of 8% per year, a $1,000 par value, and a current market price of $1,150? Group of answer choices 3.15 % 5.31 % 3.45 % 6.29%

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