Question

Maple Aircraft has issued a convertible subordinated debenture at 4.75% interest due 2020. The conversion price is $65.00 and the debenture is callable at 102.75% of face value. The market price of the convertible is 89.00% of face value, and the price of the common is $59.50. Assume that the value of the bond in the absence of a conversion feature is about 63.00% of face value. Assume a face value of $1,000.

1. What is the conversion value as a percent of face value? (Do not round intermediate calculations. Enter your answer as a percent rounded to 3 decimal places.)

Conversion value            %

2. At what stock price is the conversion value equal to the bond value? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Stock price            $

3. How much is the convertible holder paying for the option to buy one share of common stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Option value            $

Answer 1

А в C D conversion value 15.385 conversion value as a percent of face value 1.538% value of the bond in the absence of a conversion feature is about 63.00% of face value. 63% of $1,000, or $630. 7 2 40.95 10 11 12 3 The market price is $890,(89% of 1000) and the bond value in absence of conversion is 63% of $1,000, or $630. The difference divided by the conversion ratio gives the value of 13 14 the option to buy one share of stock. 16.90 15

LA conversion value =1000/65 conversion value as a percent of face value 61 =C4/1000 value of the bond in the absence of a conversion feature is about 63.00% of face value. 63% of $1,000, or $630. 7 2 =630/15.38462 The market price is $890,(89% of 1000) and the bond value in absence of conversion is 63% of $1,000, or $630. The difference divided by the conversion ratio gives the value of the option to buy one share of stock. =(890-630)/15.385