Nokia convertible bond issue in which each investor could exchange his or her 1,000 par value bond

Question:

Nokia convertible bond issue in which each investor could exchange his or her €1,000 par value bond for 383 shares of Nokia common stock. When these bonds were issued, Nokia’s stock was trading for €2.04 per share.

a. What is the conversion ratio of Nokia’s convertible bonds?
b. What is the conversion price of Nokia’s convertible bonds?
c. What was the conversion value of Nokia’s convertible bonds at the time they were issued?
d. By how much did Nokia’s stock price have to increase (from its starting value of €2.04 per share) before it would make sense for investors to exchange their bonds for common stock?
e. If Nokia had attempted to issue nonconvertible bonds after losing its investment-grade rating, the company would have had to pay an interest rate of 7 percent. What was the straight bond value of Nokia’s convertible bonds when they were issued?

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a The conversion ratio is the number of shares you can get for each convertible bond In this case each investor can exchange their 1000 par value bond ...View the full answer

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Abdul Wahab Qaiser

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