what is the conversion premium for this bond? You are analyzing a 20-year convertible bond issued byTitan Tech Inc.. The bond has a 6% annual coupon, a facevalue of $1,000, and the conversion price is $40. Thecompany's stock is currently trading at $35 per share.What is the conversion premium for this bond?a) $3b) $5c) $7d) $10

Here's how to solve it:Calculate the conversion ratio:Conversion Ratio = Face Value / Conversion…

Answered: You are analyzing a 20-year convertible…

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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NUMERICAL QUESTION: Suppose that an investor is considering the purchase of a stock or a convertible bond of COMPANY S. The stock of the company can be purchased at €20. The following information is for the convertible bond. The bond has a face value of €1,000, an annual coupon rate of 4% (coupons are paid every six months) and a maturity of 3 years. Similar bonds are selling to yield 12% annually. The current market price of the convertible bond is €920. The Time left 1:11:10 ratio is 45. 1. What is the straight value of that bond? 2. What is the minimum value of the convertible bond? 3. Assume that the investor decided to purchase the convertible bond and that 2 months later, the price of the stock fell to €16. What is the return to the investor from having bought the convertible bond? Remember to input your answer without the % sign. For instance, an answer equal to 1.52% should be entered as 1.52.
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You are analyzing a 20-year convertible bond issued by Titan Tech Inc.. The bond has a 6% annual coupon, a face value of $1,000, and the conversion price is $40. The company's stock is currently trading at $35 per share. What is the conversion premium for this bond? a) $3 b) $5 c) $7 d) $10