minimum price that the Crystal Cafes' convertible bond should sell for?

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
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Q4
Crystal Cafes recently sold a $2,000-par-value, 10-year
convertible bond with an 8% coupon interest rate. The
interest payments will be paid annually at the end of
each year and the principal will be repaid at maturity.
A similar bond without a conversion feature would
have sold with a 9% coupon interest rate. What is the
minimum price that the Crystal Cafes' convertible
bond should sell for?
Transcribed Image Text:Crystal Cafes recently sold a $2,000-par-value, 10-year convertible bond with an 8% coupon interest rate. The interest payments will be paid annually at the end of each year and the principal will be repaid at maturity. A similar bond without a conversion feature would have sold with a 9% coupon interest rate. What is the minimum price that the Crystal Cafes' convertible bond should sell for?
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