CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 6, Problem 1PROB
Summary Introduction
The convertible bonds have a face value of $1,000 which can be converted into 25 common shares.
Convertible bonds or debenture is a type of bond which has the option of converting the bonds to common shares. Each share price or the conversion price is determined by the face
Conversion ratio is the number of shares which the investor will receive per bond, whereas, conversion price is the price which is paid for obtaining each stock by converting the bond.
Conversion price could be calculated as follows:
Expert Solution & Answer
Explanation of Solution
Calculate the conversion price or the market price of the stock as below:
Therefore, the minimal stock price that would be beneficial for stockholders to convert their bonds is
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Students have asked these similar questions
The maturity value of an $35,000 non-interest-bearing, simple discount 4%, 120-day note is:
Carl Sonntag wanted to compare what proceeds he would receive with a simple interest note versus a simple discount note. Both had the same terms: $18,905 at 10% for 4 years. Use ordinary interest as needed.
Calculate the simple interest note proceeds.
Calculate the simple discount note proceeds.
What you're solving for
Solving for maturity value, discount period, bank discount, and proceeds of a note.
What's given in the problem
Face value:
$55300
Rate of interest:
10%
Length of note:
95
days
Date of note: August 23rd
Date note discounted: September 18th
Bank discount rate:9 percent
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