CFIN -STUDENT EDITION-ACCESS >CUSTOM<
6th Edition
ISBN: 9780357752951
Author: BESLEY
Publisher: CENGAGE C
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Chapter 6, Problem 2PROB
Summary Introduction
The convertible bond has a conversion ratio of 40 and a face value of $1,000.
Convertible bonds are a specific type of bonds in which the bondholders have an option to convert their bonds in to stocks. Conversion ratio determines the number of stocks given per bond. Conversion price is thus, the price to be paid for each share of stock which the investors will receive.
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Assume the M&M Model with corporate holds. Assume investors are taxed at a rate of 25% on equity income and 45% on debt income at personal tax rate.
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