bonds Given an 8% annual coupon and a conversion price of $100the stock sells at $25, and there is a forced conversion if the value is everequal or greater than $1200,the required rate of return is 12% and the bond runs 20 years a) Calculate the minimum price of the bond b) If the stock grows 15% per year into perpetuity How long will it take to reach/exceed the $1200 threshold Show proper calculation
bonds Given an 8% annual coupon and a conversion price of $100the stock sells at $25, and there is a forced conversion if the value is everequal or greater than $1200,the required rate of return is 12% and the bond runs 20 years a) Calculate the minimum price of the bond b) If the stock grows 15% per year into perpetuity How long will it take to reach/exceed the $1200 threshold Show proper calculation
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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H5.
callable bonds
Given an 8% annual coupon and a conversion price of $100the stock sells at $25, and there is a forced conversion if the value is everequal or greater than $1200,the required
a) Calculate the minimum price of the bond
b) If the stock grows 15% per year into perpetuity How long will it take to reach/exceed the $1200 threshold
Show proper calculation
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