Use the following information for the next three problems. Floppy Company has an issue of convertible bonds with a $1,000 par value. Floppy’s bonds have a 10 percent coupon rate. They have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 11 percent and the market price of the firm's common stock is currently $9.00. Based on this information, What is the conversion value of Floppy’s bond if it is selling at $970. What is its pure bond value? What is its conversion premium?
Use the following information for the next three problems. Floppy Company has an issue of convertible bonds with a $1,000 par value. Floppy’s bonds have a 10 percent coupon rate. They have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 11 percent and the market price of the firm's common stock is currently $9.00. Based on this information, What is the conversion value of Floppy’s bond if it is selling at $970. What is its pure bond value? What is its conversion premium?
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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Use the following information for the next three problems.
Floppy Company has an issue of convertible bonds with a $1,000 par value. Floppy’s bonds have a 10 percent coupon rate. They have a 10-year maturity, and are convertible into 100 shares of common stock. The yield to maturity on bonds of similar risk is 11 percent and the market price of the firm's common stock is currently $9.00. Based on this information,
- What is the conversion value of Floppy’s bond if it is selling at $970.
- What is its pure
bond value ? - What is its conversion premium?
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