Suppose you own a convertible bond that has a conversion ratio equal to 62. Each convertible bond has a face value equal to $1,000. The current market value of the company's common stock is $16, and the bond is selling for $1,042. If you want to liquidate your position today because you need money to pay your rent, should you sell the bond or should you convert the bond into common stock and then sell the stock? Explain your answer. Round your answers to the nearest dollar.Selling the bond would generate $_______ . Converting the bond and selling the common stock would generate $_______ . Thus, it would be better to SELL THE BOND / CONVERT THE BOND INTO COMMON STOCK AND THEN SELL THE STOCK Suppose you own a convertible bond that has a conversion ratio equal to 62. Each convertible bond has a face value equal to $1,000. The current marketvalue of the company's common stock is $16, and the bond is selling for $1,042. If you want to liquidate your position today because you need money topay your rent, should you sell the bond or should you convert the bond into common stock and then sell the stock? Explain your answer. Round youranswers to the nearest dollar.Selling the bond would generate $1. Converting the bond and selling the common stock would generate $Thus, it would be bettertv -Select-sell the bondconvert the bond into common stock and then sell the stock

Income generate from selling the bonds would be $1042. If convertible bonds are converted into…

Answered: Selling the bond would generate…

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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Suppose you own a convertible bond that has a conversion ratio equal to 62. Each convertible bond has a face value equal to $1,000. The current market value of the company's common stock is $16, and the bond is selling for $1,042. If you want to liquidate your position today because you need money to pay your rent, should you sell the bond or should you convert the bond into common stock and then sell the stock? Explain your answer. Round your answers to the nearest dollar.

Selling the bond would generate $_______ . Converting the bond and selling the common stock would generate $_______ . Thus, it would be better to SELL THE BOND / CONVERT THE BOND INTO COMMON STOCK AND THEN SELL THE STOCK