Advance Managerial Finance
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Business, Finance - Year 2
What is the bond 's conversion ratio? What is the bond 's conversion value? What is the bond 's straight-debt value?
The following data apply to Saunders Corporation 's convertible bonds: Maturity 10 Stock Price $30.00 Par Value $1,000 Conversion Price $35.00 Annual Coupon 5% Straight-Debt Yield 8% 1) What is the bond 's conversion ratio? A. 27.14 B. 28.57 C. 30.00 D. 31.50 E. 33.08 2) What is the bond 's conversion value? A. $698.15 B. $734.89 C. $773.57 D. $814.29 E. $857.14 3) What is the bond 's straight-debt value? A. $684.78 B. $720.82 C. $758.76 D. $798.70 E. $838.63 Created: Sep 29, 2007 11:43 am Solution By OTA: 103477, Parool Agarwal, CA (IP)
Solution go to problem
The following data apply to Saunders Corporation 's convertible bonds: Maturity 10 Stock Price $30.00 Par Value $1,000 Conversion Price $35.00 Annual Coupon 5% Straight-Debt Yield 8% 1) What is the bond 's conversion ratio? A. 27.14 B. 28.57 C. 30.00 D. 31.50 E. 33.08 Answer: B. 28.57 Conversion ratio = Par value / Conversion Price= 28.5714 =1000/35 2) What is the bond 's conversion value? A. $698.15 B. $734.89 C. $773.57 D. $814.29 E. $857.14 Answer: E. $857.14 Conversion Value -- The value of the convertible security in terms of the common stock into which the security can be converted. It is equal to the conversion ratio times the current market price per share of the common stock. Conversion ratio = Number of shares that the bond can be converted into= 28.5714 Current share price= $30.00 Therefore, conversion value of the bond= $857.14 =28.5714x30 3) What is the bond 's straight-debt value? A. $684.78 B. $720.82 C. $758.76 D. $798.70 E. $838.63 Answer: D. $798.70 To calculate the price of the bond we need to calculate / read from tables the values of PVIF= Present Value Interest Factor PVIFA= Present Value Interest Factor for an Annuity Price of bond= PVIF * Redemption value + PVIFA * interest payment per
Business, Finance - Year 2
What is the bond 's conversion ratio? What is the bond 's conversion value? What is the bond 's straight-debt value?
The following data apply to Saunders Corporation 's convertible bonds: Maturity 10 Stock Price $30.00 Par Value $1,000 Conversion Price $35.00 Annual Coupon 5% Straight-Debt Yield 8% 1) What is the bond 's conversion ratio? A. 27.14 B. 28.57 C. 30.00 D. 31.50 E. 33.08 2) What is the bond 's conversion value? A. $698.15 B. $734.89 C. $773.57 D. $814.29 E. $857.14 3) What is the bond 's straight-debt value? A. $684.78 B. $720.82 C. $758.76 D. $798.70 E. $838.63 Created: Sep 29, 2007 11:43 am Solution By OTA: 103477, Parool Agarwal, CA (IP)
Solution go to problem
The following data apply to Saunders Corporation 's convertible bonds: Maturity 10 Stock Price $30.00 Par Value $1,000 Conversion Price $35.00 Annual Coupon 5% Straight-Debt Yield 8% 1) What is the bond 's conversion ratio? A. 27.14 B. 28.57 C. 30.00 D. 31.50 E. 33.08 Answer: B. 28.57 Conversion ratio = Par value / Conversion Price= 28.5714 =1000/35 2) What is the bond 's conversion value? A. $698.15 B. $734.89 C. $773.57 D. $814.29 E. $857.14 Answer: E. $857.14 Conversion Value -- The value of the convertible security in terms of the common stock into which the security can be converted. It is equal to the conversion ratio times the current market price per share of the common stock. Conversion ratio = Number of shares that the bond can be converted into= 28.5714 Current share price= $30.00 Therefore, conversion value of the bond= $857.14 =28.5714x30 3) What is the bond 's straight-debt value? A. $684.78 B. $720.82 C. $758.76 D. $798.70 E. $838.63 Answer: D. $798.70 To calculate the price of the bond we need to calculate / read from tables the values of PVIF= Present Value Interest Factor PVIFA= Present Value Interest Factor for an Annuity Price of bond= PVIF * Redemption value + PVIFA * interest payment per