6-3 Suppose you own a convertible bond that has a conversion ratio equal to 5o. Each convertible bond has a face value equal to $1,000. The current market value of the company's common stock is $19, and the bond is selling for $980. If you want to liquidate your position today because you need money to pay your rent, should you se the bond or should you convert the bond into common stock and then sell the stock? Explain your answer.

6-3 Suppose you own a convertible bond that has a conversion ratio equal to 5o. Each convertible bond has a face value equal to $1,000. The current market value of the company's common stock is $19, and the bond is selling for $980. If you want to liquidate your position today because you need money to pay your rent, should you se the bond or should you convert the bond into common stock and then sell the stock? Explain your answer.

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter6: Bonds (debt) - Characteristics And Valuation

Section: Chapter Questions

Problem 3PROB

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Think answer is convert to common stock

6-3 Suppose you own a convertible bond that has a conversion ratio equal to 5o. Each
convertible bond has a face value equal to $1,000. The current market value of the
company's common stock is $19, and the bond is selling for $980. If you want to
liquidate your position today because you need money to pay your rent, should you se
the bond or should you convert the bond into common stock and then sell the stock?
Explain your answer.

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