(a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent. Present Value of 8% for 10 years is 0.463 and Present Value of annuity of 8% for 10 years is 6.710. (i) Calculate the straight bond value of the bond.
(a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent. Present Value of 8% for 10 years is 0.463 and Present Value of annuity of 8% for 10 years is 6.710. (i) Calculate the straight bond value of the bond.
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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- (a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent.
Present Value of 8% for 10 years is 0.463 and Present Value ofannuity of 8% for 10 years is 6.710.
(i) Calculate the straight
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(a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent.
(ii) Calculate the conversion value of the bond when the market price of the stock is Rs30/share.
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