You are the CFO of RealNetworks on July 1, 2008. The company's stock price is $9.69 and its convertible debt is now callable. See the cable below: Convertible Subordinated Notes Issued under U.S. SEC Rule 144A Aggregate principal amount Proceeds net of offering costs Coupon Conversion ratio Call date Call price Maturity $100 million $97.0 million 0% 107.3296 shares per $1,000 principal amount July 1, 2008 100% July 1, 2010
You are the CFO of RealNetworks on July 1, 2008. The company's stock price is $9.69 and its convertible debt is now callable. See the cable below: Convertible Subordinated Notes Issued under U.S. SEC Rule 144A Aggregate principal amount Proceeds net of offering costs Coupon Conversion ratio Call date Call price Maturity $100 million $97.0 million 0% 107.3296 shares per $1,000 principal amount July 1, 2008 100% July 1, 2010
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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Transcribed Image Text:You are the CFO of RealNetworks on July 1, 2008. The company's stock price is $9.69 and its convertible debt is now callable. See the
table below:
Convertible Subordinated Notes
Issued under U.S. SEC Rule 144A
Aggregate principal amount
Proceeds net of offering costs
Coupon
Conversion ratio
Call date
Call price
Maturity
$100 million
$97.0 million
0%
Bondholders
107.3296 shares per $1,000 principal amount
July 1, 2008
100%
July 1, 2010
a. What is the value of the shares the bondholders would receive per $1,000 bond if they convert?
The value the bondholders would receive is $
(Round to the nearest cent.)
b. What is the value per $1,000 bond they would receive under the call?
The value they would receive under the call is $. (Round to the nearest cent.)
c. If you call the bonds, will the bondholders convert into shares or accept the call price? (Select from the drop-down menus.)
convert into shares if you call the bonds, as the value of converting is
than the value received under the call.
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