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. (iii) What is the least you would expect the bond to sell for at a market price of common stock of Rs18/share?
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. (iii) What is the least you would expect the bond to sell for at a market price of common stock of Rs18/share?
Chapter13: Long-term Liabilities
Section: Chapter Questions
Problem 19MC: Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for...
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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.
(iii) What is the least you would expect the bond to sell for at a market price of common stock of Rs18/share?
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