ave a convertible bond with a par value of 100,000 with a 10% coupon. It can be converted into shares at a conversion price of 5,000€. The current price is of 4,300€. If the dividends of the share are currently 200€, and if these grow at a rate of 6% per year, would you, as a bondholder, convert or not in 5 years time? Suppose that the share price coincides with its intrinsic value/objective pric
ave a convertible bond with a par value of 100,000 with a 10% coupon. It can be converted into shares at a conversion price of 5,000€. The current price is of 4,300€. If the dividends of the share are currently 200€, and if these grow at a rate of 6% per year, would you, as a bondholder, convert or not in 5 years time? Suppose that the share price coincides with its intrinsic value/objective pric
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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12.
You have a convertible bond with a par value of 100,000 with a 10% coupon. It can
be converted into shares at a conversion price of 5,000€. The current price is of 4,300€.
If the dividends of the share are currently 200€, and if these grow at a rate of 6% per
year, would you, as a bondholder, convert or not in 5 years time? Suppose that the share
price coincides with its intrinsic value/objective price and that the re is 10.93%.
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