You have been hired to value a new 30-year callable, convertible bond. The bond has a 5.3% coupon, payable annually. The conversion price is $16, and the stock currently sells for $3.84. The stock price is expected to grow at 10% per year. The bond is callable at $120, but, based on prior experience, it won't be called unless the conversion value is $130. The required return on this bond is 7%. Assume par value of the bond is $100. What value would you assign to this bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Bond value
You have been hired to value a new 30-year callable, convertible bond. The bond has a 5.3% coupon, payable annually. The conversion price is $16, and the stock currently sells for $3.84. The stock price is expected to grow at 10% per year. The bond is callable at $120, but, based on prior experience, it won't be called unless the conversion value is $130. The required return on this bond is 7%. Assume par value of the bond is $100. What value would you assign to this bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places.) Bond value
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 have been hired to value a new 30-year callable, convertible bond. The bond has a 5.3% coupon, payable annually. The
conversion price is $16, and the stock currently sells for $3.84. The stock price is expected to grow at 10% per year. The bond is
callable at $120, but, based on prior experience, it won't be called unless the conversion value is $130. The required return on this
bond is 7%. Assume par value of the bond is $100.
What value would you assign to this bond? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)
Bond value
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