Question: Sportime Fitness Center Inc issued convertible bonds with a conversion

Sportime Fitness Center, Inc., issued convertible bonds with a conversion price of $51. The bonds are available for immediate conversion. The current price of the company’s common stock is $44 per share. The current market price of the convertible bonds is $990. The convertible bonds’ straight value is not known.
a. What is the minimum price for the convertible bonds?
b. Explain the difference between the current market price of each convertible bond and the value of the common stock into which it can be immediately converted.

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  • CreatedAugust 28, 2014
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