What is the current yield on the bond-current price of bond

Assignment Help Financial Management
Reference no: EM131333700

The Olsen Mining Company has been very successful in the last five years. Its $1,000 par value convertible bonds have a conversion ratio of 32. The bonds have a quoted interest rate of 9 percent a year. The firm’s common stock is currently selling for $49.20 per share. The current bond price has a conversion premium of $10 over the conversion value.

a. What is the current price of the bond? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

b. What is the current yield on the bond (annual interest divided by the bond’s market price)? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

c. If the common stock price goes down to $25.50 and the conversion premium goes up to $100, what will be the new current yield on the bond? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Reference no: EM131333700

Questions Cloud

The bonds are currently selling at conversion premium : Vernon Glass Company has $10 million in 10 percent convertible bonds outstanding. The conversion ratio is 40, the stock price is $21, and the bond matures in 10 years. The bonds are currently selling at a conversion premium of $60 over their conversi..
Design and implement an algorithm : Design and implement an algorithm that accepts as input an ordered list of search names. The task required is to establish and report the absence or presence of these search names in a second much longer ordered list.
Check whether the given matchings are stable : Consider the following system of preferences.- Check whether the given matchings are stable. Justify your answers.
Cells in the dermis and epidermis thickened : Explain why  in Psoriasis is an  the cells in the dermis and epidermis thickened. Decreased cell maturation occurs in psoriasis  as a result of?
What is the current yield on the bond-current price of bond : The Olsen Mining Company has been very successful in the last five years. Its $1,000 par value convertible bonds have a conversion ratio of 32. The bonds have a quoted interest rate of 9 percent a year. What is the current price of the bond? What is ..
Discuss different types of terrorist threats : In a minimum of 250 words, post to the Discussion Area your response to the following points: Discuss different types of terrorist threats that the United States might expect to encounter in the future
What happened to worldcom and enron : MGMT314- What happened to Nortel is similar to what happened to WorldCom and Enron in the early 2000s, and to Lehman Brothers, Citigroup, and many other banks during the 2008 financial crisis. Why do business people keep making the same mistake?
Immune and musculoskeletal diseases : Immune and Musculoskeletal Diseases. Research an autoimmune disease that affects the musculoskeletal system.
What is the probability their next child : A man and a woman both have polydactyly (i.e., six fingers on each hand), a trait which is determined in this example by a single gene. They have four children, none of whom have polydactyly. What is the probability their next child will have poly..

Reviews

Write a Review

 

Financial Management Questions & Answers

  Assume that stock will begin paying dividends

Assume that a stock will begin paying dividends one year from today, starting with a fifty cent annual dividend. The consensus analyst forecast is that dividends will grow at 12% per year for the following four years (meaning that the dividend in yea..

  What is the market rate of return on this stock

The common stock of Eddie's Engines, Inc. sells for $45.08 a share. The stock is expected to pay $3.50 per share next year. Eddie's has established a pattern of increasing their dividends by 5.6 percent annually and expects to continue doing so. What..

  What was the expected level of inflation

The risk-free rate on T-bills recently was 1.23%. If the real rate of interest is estimated to be 0.80%, what was the expected level of inflation?

  How the supply chain and the macroeconomic environment

Any cost that a health care manager can authorize or directly influence is a controllable cost. Examples of non-controllable costs for the business include: taxes, interest, costs mandated in the fulfilment of contracts, costs of having the buildings..

  Annual payment-what is difference in the present value

You are scheduled to receive annual payments of $10,400 for each of the next 20 years. Your discount rate is 9 percent. What is the difference in the present value if you receive these payments at the beginning of each year rather than at the end of ..

  What is the amount of the collection float

A firm had a ledger balance of $4,122 with no outstanding deposits or checks. Today, your firm deposited 4 checks in the amount of $466 each and wrote a check in the amount of $969. What is the amount of the collection float as of the end of the day?

  Western hydra systems makes panel milling machine

Western Hydra Systems makes a panel milling machine with a 2.7-m-diameter milling head that emits low vibration and processes stress-relieved aluminium panels measuring up to 6000 mm long. The company wants to borrow money for a new production/wareho..

  Rationale for choosing the company for which to invest

Rationale for choosing the company for which to invest - "Six Rules to Follow When Picking Stocks" Get Your Smart Beta Here! Dividend Growth Stocks As 'Strategic Beta' Investments

  What is the risk-free rate and your required return

Assume the real rate of return in the economy is 2.5%, expected rate of inflation is 4%, and the risk premium is 5.9%, what is the risk-free rate and your required return?

  Discuss effect both on total return and on the capital gain

In an efficient market, when should the stock price react to the value consequences of a dividend change? Discuss the effect both on the total return and on the capital gain. Which should be larger?

  Increased by sales transaction

A company delivered $10,000 of goods to a customer that agreed to pay cash within 30 days. The goods had cost $8,000 to manufacture. Which of the following items would be increased by this sales transaction?

  Stock was underwritten by advantage securities

A recent offering of Talmot Corporation stock was underwritten by Advantage Securities. The terms were: Price to public $10 per share, number of shares 10 million, and proceeds to Talmot $95,000,000. The out-of-pocket expenses incurred by Advantage S..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd