a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent. Present Value of 8% for 10 years is 0.463 and Present Value of annuity of 8% for 10 years is 6.710. (iii) What is the least you would expect the bond to sell for at a market price of common stock of Rs18/share?

a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent. Present Value of 8% for 10 years is 0.463 and Present Value of annuity of 8% for 10 years is 6.710. (iii) What is the least you would expect the bond to sell for at a market price of common stock of Rs18/share?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 19MC: Gingko Inc. issued bonds with a face value of $100,000, a rate of 7%, and a 10-yearterm for...

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(a) Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent. Present Value of 8% for 10 years is 0.463 and Present Value of annuity of 8% for 10 years is 6.710. (ii) Calculate the conversion value of the bond when the market price of the stock is Rs30/share.
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A company has a convertible bond outstanding with a conversion price of $50 and maturity in 10 years. The company's share price is $24.25. This convertible bond is comparable to a 10-year coupon bond traded in the market with face value of $1,000, annual coupon rate of 9%, and required return of 12%. What is the floor value of this convertible bond? O $2,575 O $830.49 O $928.34 O $24.25 O $485
Biden Ltd has an outstanding issue of convertible bonds with a Rs1, 000 par value. These are convertible into 50 shares of common stock. They have a 10 per cent coupon and a 10-year maturity. The interest rate on a straight bond of similar risk is eight per cent. Present Value of 8% for 10 years is 0.463 and Present Value of annuity of 8% for 10 years is 6.710. Biden Ltd has recently changed its management team. At a meeting one of the members of the team questioned the massive investment in the stock market the problems the company may face.As a consultant to the company, you are required to report to the management team on the related risks that Biden Ltd must keep in view.
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