Determining values-Convertible bond Eastern Clock Company has an outstanding issue of convertible bonds with a $1,5 convertible into 60 shares of common stock. They have a 14% annual coupon interest rate and a 8-year maturity. The interes currently 9%. 1. Calculate the straight bond value of the bond. . Calculate the conversion (or stock) value of the bond when the market price of the common stock is $50 per share. What is the least you would expect the bond to sell for, regardless of the common stock price behavior? . The straight value of the bond is S (Round to the nearest cent.)
Determining values-Convertible bond Eastern Clock Company has an outstanding issue of convertible bonds with a $1,5 convertible into 60 shares of common stock. They have a 14% annual coupon interest rate and a 8-year maturity. The interes currently 9%. 1. Calculate the straight bond value of the bond. . Calculate the conversion (or stock) value of the bond when the market price of the common stock is $50 per share. What is the least you would expect the bond to sell for, regardless of the common stock price behavior? . The straight value of the bond is S (Round to the nearest cent.)
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:Determining values-Convertible bond Eastern Clock Company has an outstanding issue of convertible bonds with a $1,500 par value. These bonds are
convertible into 60 shares of common stock. They have a 14% annual coupon interest rate and a 8-year maturity. The interest rate on a straight bond of similar risk is
currently 9%.
a. Calculate the straight bond value of the bond.
b. Calculate the conversion (or stock) value of the bond when the market price of the common stock is $50 per share.
c. What is the least you would expect the bond to sell for, regardless of the common stock price behavior?
a. The straight value of the bond is $. (Round to the nearest cent.)
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