Determining values-Convertible bond Craig's Cake Company has an outstanding issue of 8-year convertible bonds with a...

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Determining values-Convertible bond Craig's Cake Company has an outstanding issue of 8-year convertible bonds with a $1,000 par value. These bonds are convertible into 90 shares of common stock. They have a 16% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 14%. a. Calculate the straight bond value of this bond. b. Calculate the conversion (or stock) value of the bond when the market price is $10 per share of common stock. c. What is the minimum market value of the bond? a. The straight value of the bond is (Round to the nearest cent.) Determining values-Convertible bond Craig's Cake Company has an outstanding issue of 8-year convertible bonds with a $1,000 par value. These bonds are convertible into 90 shares of common stock. They have a 16% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 14%. a. Calculate the straight bond value of this bond. b. Calculate the conversion (or stock) value of the bond when the market price is $10 per share of common stock. c. What is the minimum market value of the bond? a. The straight value of the bond is (Round to the nearest cent.)

Answer rating: 100% (QA)

a Straight Bond Value The straight bond value can be calculated using the present value formula for ... View the full answer