An 8% bond $100 has a current market value of $102.5. The bond covenant provides that 5 year from now, at redemption, 1-bond can be redeemed at 5% premium to its nominal value. The covenant also provides for conversion option, where the conversion ratio is 19 equity shares. The current market price per share is $5. Assuming a 4.5% annual growth in share price; determine the cost of debt, if the bond was: irredeemable Redeemable (and not convertible) Convertible
An 8% bond $100 has a current market value of $102.5. The bond covenant provides that 5 year from now, at redemption, 1-bond can be redeemed at 5% premium to its nominal value. The covenant also provides for conversion option, where the conversion ratio is 19 equity shares. The current market price per share is $5. Assuming a 4.5% annual growth in share price; determine the cost of debt, if the bond was: irredeemable Redeemable (and not convertible) Convertible
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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An 8% bond $100 has a current market value of $102.5. The bond covenant provides that 5 year from now, at redemption, 1-bond can be redeemed at 5% premium to its nominal value. The covenant also provides for conversion option, where the conversion ratio is 19 equity shares. The current market price per share is $5. Assuming a 4.5% annual growth in share price; determine the cost of debt, if the bond was: irredeemable Redeemable (and not convertible) Convertible
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