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What is the pure value of the bond

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Reference no: EM132712990

Manpower Electric Company has 7 percent convertible bonds outstanding. Each bond has a $1,000 par value. The conversion ratio is 25, the stock price is $38, and the bonds mature in 16 years.

Problem a. What is the conversion value of the bond?

Problem b. Assume that after one year the common share price falls to $27.50. What is the conversion value of the bond? (Round the final answer to 2 decimal places.)

Problem c. Also, assume that after one year interest rates go up to 10 percent on similar bonds. There are 15 years left to maturity. What is the pure value of the bond? Use semiannual analysis. (Use a Financial calculator to arrive at the answers. Round the final answer to 2 decimal places.)

Reference no: EM132712990

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