ZuoTi.Pro
Question

You bought a convertible bond issued by HiTech Corp which has a conversion ratio of 50...

You bought a convertible bond issued by HiTech Corp which has a conversion ratio of 50 common shares for each $1,000 bond. At what stock price per share would you make a profit (“in the money”) if you bought the bond at par? What would you expect the bond to sell for in the market if the stock trades at $28 per share?

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

a: Conversion ratio = Par value/Share price

50= 1000/Share price

Share price = 1000/50 = $20

b: Price of bond = Conversion Value = Conversion Ratio × Current Share Price

= 50*28 = $1400

0 0
Add a comment
Know the answer?
Add Answer to:
You bought a convertible bond issued by HiTech Corp which has a conversion ratio of 50...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • You bought a convertible bond issued by HiTech Corp which has a conversion ratio of 50...

    You bought a convertible bond issued by HiTech Corp which has a conversion ratio of 50 common shares for each $1,000 bond. a. At what stock price per share would you make a profit (“in the money”) if you bought the bond at par? b. What would you expect the bond to sell for in the market if the stock trades at $28 per share?

  • Please answer all parts. 1. You bought a $1,000 par Dominion Company bond on March 1....

    Please answer all parts. 1. You bought a $1,000 par Dominion Company bond on March 1. The bond pays a coupon rate of 4%/year semiannually on November 1 and May 1. How much accrued interest did you pay? 2. Morgan Stanley manages a well-diversified, speculative grade bond portfolio which is expected to have an annual default rate of 4.2% and loss given default of 60%. What is the portfolio's expected loss over the next 12 months? (Your answer should be...

  • Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30...

    Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30 and the stock currently sells for $25 per share. Would it make better financial sense to hold onto the bond or convert it? hold onto the bond convert the bond can’t tell from this information convert the bond after two more dividend payments

  • Determining values-Convertible bond Eastern Clock Company has an outstanding issue of convertible bonds with a $2,000...

    Determining values-Convertible bond Eastern Clock Company has an outstanding issue of convertible bonds with a $2,000 par value. These bonds are convertible into 35 shares of common stock. They have a 9% annual coupon interest rate and a 25-year maturity. The interest rate on a straight bond of similar risk is currently 13%. a. Calculate the straight bond value of the bond. b. Calculate the conversion (or stock) value of the bond when the market price of the common stock...

  • Conversion price Calculate the conversion price for each of the following convertible bonds: a. A $1,000-par-value...

    Conversion price Calculate the conversion price for each of the following convertible bonds: a. A $1,000-par-value bond that is convertible into 40 shares of common stock. b. A$1000-par-value bond that is convertible into 25 shares of common stock. c. A $1,000-par-value bond that is convertible into 125 shares of common stock. a. The conversion price is $ per share. (Round to the nearest cent.)

  • Assume that ABC Company successfully issues a 6% convertible bond, due 12 years from now at...

    Assume that ABC Company successfully issues a 6% convertible bond, due 12 years from now at $1,000 per bond. The bond pays interest 2 times per year. Also, assume that the bond is convertible into 100 shares of stock anytime during the life of the bond. Assume the common stock of the company is selling for $8 per share at the time the convertible bond is issued. The last assumption is that if ABC Company issued a regular bond (not...

  • Find the conversion value of a convertible preferred stock that carries a conversion ratio of 1.8,...

    Find the conversion value of a convertible preferred stock that carries a conversion ratio of 1.8, given that the market price of the underlying common stock is $32.86 a share. Would there be any conversion premium if the convertible preferred were selling at $73.82 a share? If so, how much in dollar and percentage terms)? Also, explain the concept of conversion parity, and then find the conversion party of this issue given that the preferred trades at 573.82 per share....

  • In 2017, Sheffield Corp., issued for $102 per share, 97000 shares of $100 par value convertible...

    In 2017, Sheffield Corp., issued for $102 per share, 97000 shares of $100 par value convertible preferred stock. One share of preferred stock can be converted into three shares of Sheffield's $20 par value common stock at the option of the preferred stockholder. In August 2018, all of the preferred stock was converted into common stock. The market value of the common stock at the date of the conversion was $25 per share. What total amount should be credited to...

  • Conversion price Calculate the conversion price for the following convertible bond: A $700-par-value bond that is...

    Conversion price Calculate the conversion price for the following convertible bond: A $700-par-value bond that is convertible into 25 shares of common stock. The conversion price is $_______  per share. (Round to the nearest cent.)

  • Conversion (or stock) value What is the conversion (or stock) value of each of the following...

    Conversion (or stock) value What is the conversion (or stock) value of each of the following convertible bonds? a. A $1,000-par-value bond that is convertible into 25 shares of common stock. The common stock is currently selling for $50.00 per share. b. A$1,000-par-value bond that is convertible into 12.5 shares of common stock. The common stock is currently selling for $42.00 per share. c. A$1,000-par-value bond that is convertible into 100 shares of common stock. The common stock is currently...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT