Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Suppose an investor is considering the purchase of a stock or a convertible bond of COMPANY Z. The stock of the company can be purchased at €18.
The following information is for the convertible bond. The bond has a face value of €1,000, an annual coupon rate of 5% (coupons are paid every six months) and a maturity of 4 years. Similar bonds are selling to yield 9% annually. The current market price of the bond is €925. The conversion ratio is 50. Assume that the investor decided to purchase the convertible bond and that 2 months later, the price of the stock went to €13. What is the return to the investor from having bought the convertible bond.
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- Suppose that you are interested in purchasing a bond issued by the VPI Corporation. The bond is quoted in the Wall Street Journal as selling for 89.665. How much will you pay for the bond if you purchase it at the quoted price? Assuming you hold the bond until maturity, how much will you receive at that time? If you purchase the bond at the quoted price, you would pay $. (Round to the nearest cent) Assuming you hold the bond until maturity, you would receive $ (Round to the nearest dollar)arrow_forwardMitzi's, II. bonds offer a 5% semiannual coupon at a current market price of $989, 20 years to maturity, and 4 years to call. The bonds have a face value of $1,000 and a call price of $1,025. What is the current yield on these bonds?arrow_forward
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