# Question

Layne Resources, Inc. has a $1,000 face value convertible bond outstanding that has a market value of $1,020. It has a coupon rate of 5 percent and matures in 12 years. The conversion price is $20. The common stock currently is selling for $16.

a. What is the conversion premium (in percent)?

b. At what price does the common stock need to sell for the conversion value to be equal to the current bond price?

c. Assume the common stock price goes up to $26 and the conversion premium goes down to $15, what will be the price of the bond?

d. What was the percentage gain in the price of the common stock? What was the percentage gain in the price of the bond?

e. What was the primary reason the conversion premium went down from $120 to $15?

a. What is the conversion premium (in percent)?

b. At what price does the common stock need to sell for the conversion value to be equal to the current bond price?

c. Assume the common stock price goes up to $26 and the conversion premium goes down to $15, what will be the price of the bond?

d. What was the percentage gain in the price of the common stock? What was the percentage gain in the price of the bond?

e. What was the primary reason the conversion premium went down from $120 to $15?

## Answer to relevant Questions

Assume you bought a convertible bond two years ago for $900. The bond has a conversion ratio of 32. When the bond was purchased, the stock was selling for $25 per share. The bond pays $75 in annual interest. The stock pays ...What is meant by the exercise or strike price on an option? Assume a 40 July put option is purchased for 6.50 on a stock selling at $35 per share. If the stock ends up on expiration at 38.75, what will be the value of the put option? How can using the financial futures markets for interest rates and foreign exchange help financial managers through hedging? Briefly explain, and give one example of each. Should the treasurer of the Larson Corporation feel he has failed in her tasks if the circumstance in part c of problem 11 takes place?Post your question

0