Gentherm Inc. has a convertible bond issue outstanding. Each bond, with a face value of $ 1,000,

Question:

Gentherm Inc. has a convertible bond issue outstanding. Each bond, with a of $ 1,000, can be converted into common shares at a rate of 42.25 shares of stock per $ 1,000 bond (the conversion rate), or $ 19.85 per share. Gentherm’s is trading (on the NYSE) at $ 19.85 per share and the bonds are trading at $ 1,025.
a. Calculate the conversion value of each bond.
b. Determine if it is currently profitable for bond holders to convert their bonds into shares of Gentherm .

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...