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Consider the hypothetical convertible bond

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Reference no: EM13946920

Consider the following hypothetical convertible bond:

            Par Value        = $1,000

            Coupon Rate   = 9.5%

            Market Price of convertible bond      = $1,000

            Conversion ratio         = 37.383

            Estimated straight value of bond       = $510

            Yield to maturity of the straight bond   = 18.7%

Assume that the price of the common stock is $23 and that the dividend per share is $0.75 per year.

Calculate each of the following:

            Conversion value

            Market conversion price

            Conversion premium per share

            Conversion premium ratio

            Premium over straight value

            Premium payback period

Reference no: EM13946920

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