May Limited issued $350million with 350,000 bonds of 2.5% senior unsecured 4-year convertible bonds in June 2015 (i.e. mature in June 2020). The bonds were issued at face value of $1,000 per bond. The conversion price was $35.446 per share, a premium of 35% to the current price. What is the estimated amount that the investors of May Limited are paying for the option to convert by assuming the annual yield on the straight bonds for May Limited is 4.5%? Oa. $68.80 O b. $88.80 Oc. $87.80 O d. $78.80

May Limited issued $350million with 350,000 bonds of 2.5% senior unsecured 4-year convertible bonds in June 2015 (i.e. mature in June 2020). The bonds were issued at face value of $1,000 per bond. The conversion price was $35.446 per share, a premium of 35% to the current price. What is the estimated amount that the investors of May Limited are paying for the option to convert by assuming the annual yield on the straight bonds for May Limited is 4.5%? Oa. $68.80 O b. $88.80 Oc. $87.80 O d. $78.80

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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