What is the convertible bond's conversion value for this financial accounting question? If a convertible bond has a conversion ratio of 20, aface value of $1,000, a coupon rate of 8 percent,and the market price for the company's stockis $15 per share, what is the convertible bond'sconversion value?

Step 1: Define Convertible BondsA convertible bond is a debenture that can be exchanged for several…

Answered: If a convertible bond has a conversion…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Financial accounting
Calculate the market conversion price for a convertible bond with par value of $4000, coupon rate of 5%, market price of $4000, a conversion ratio of 16, and current stock price of $202. 1. Assuming, the issuing company pays an annual dividend of $12 per share, what is the favorable income differential (yield advantage) per share for this bond? 2. Calculate the premium payback period for this bond.
Consider a convertible bond as follows: par value = $1,000, coupon rate = 8.00%, market price of convertible bond = $1,100, conversion ratio = 18, straight value of bond = $600, yield to maturity of straight bond = 10%, current price of common stock = $45, dividend per share = $3.00/year. A. What is the favorable income differential per bond (not per share)? B. At what stock price, the realized return from investing in the convertible bond becomes zero? In other words, what is the break-even stock price?
A convertible bond has a par value of $1,000 and a conversion priceof $25. The stock currently trades for $22 a share. What are thebond’s conversion ratio and conversion value at t= 0? (40, $880)
A certain convertible bond has a conversion ratio of 30 and a conversion premium of 15%. The current market price of the underlying common stock is $30. What is the bond's conversion equivalent?SaThe bond's conversion equivalent is $(Round to the nearest cent.)
What is the solution and working
A $1,000 face value bond has a conversion ratio of 49. You estimate the transaction costs of conversion to be 3.4% of the face value of the bond. What price must the stock reach in order for you to convert? The required price per share will be $ (Round to the nearest cent.)
Given the following information concerning a convertible bond: Principle: $1,000 Coupons: 5 percent Maturity: 15 years Call Price: $1,050 Conversion price: $37 (i.e., 27 shares) Market Price of the Bond: $1040 Common stock: $30 G. What is the probability that the corporation will call this bond? H. Why are investors willing to pay the premiums mentioned in questions d and f? (D, What is the premium in terms of stock that the investor pays when he or she purchases the convertible bond instead of the stock? F,What is the premium in terms of debt that the investor pays when he or she purchases the convertible bond instead of a nonconvertible bond?) (dont need D and F answers only G. and H. need help with please dont put in excel i dontunderstand that stuff yet equations and worded answers please)
A$1,000 face value convertible bond has a conversion ratio of 31 and is about to mature. Ignoring any transaction costs, what price must the stock surpass in order for you to convert? The required price per share will be $ (Round to the nearest cent.)
Given the following information concerning a convertible bond: Coupon: 6 percent ($60 per $1,000 bond) Exercise Price: $25 Maturity date: 20 years Call Price: $1040 Price of the common stock: $30 If the bond were not convertible, what would be its approximate value if comparable interest rates were 9 percent? How many shares can the bond be converted into? What is the value of the bond in terms of stock? What is the current minimum price that the bond will command? Is there any reason to anticipate that the firm will call the bond? What do investors receive if they do not convert the bond when it is called? If the bond were called, would it be advantageous to convert?
When a coupon bond pays coupon at the same rate as its market yield, the coupon bond is priced at par. That is, its market price = 100% of its principal amount. If the issuer decides to pay coupon at the rate of 1.5 times of its market yield, (i.e., paying 3% when 2% is the market yield) at what multiple of its principal amount will the coupon bond be priced at the market? → (1) Lower than 1.5; (2) Higher than 1.5; (3) Equal to 1.5; [ Assume that the market yield is positive.]

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If a convertible bond has a conversion ratio of 20, a face value of $1,000, a coupon rate of 8 percent, and the market price for the company's stock is $15 per share, what is the convertible bond's conversion value?