Calculate the current value of the straight bond

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In the end of 2000, D Inc. issued 2.625% convertible bonds due in 2008. Each bond was convertible into 2,000 shares of D Inc. equity any time before maturity. When D Inc. issued the convertible bonds, its share price is £25. The conversion price is £50. Suppose that straight bond issued by D Inc. was priced to yield 11.5% per year in the end of 2000.

Question 1) What is the face value of the bond?

Question 2) Calculate the current value of the straight bond.

Question 3) Briefly explain the term of conversion ratio and calculate the conversion value of the bond.

Question 4) Illustrate and explain the floor value of the convertible bond.

Question 5) Mathematically express the process to compute the value of warrants.

Reference no: EM132533008

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