Today is the morning of Jan 2, Year 5. XYZ Inc has exchange-listed convertible bonds outstanding....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Today is the morning of Jan 2, Year 5. XYZ Inc has exchange-listed convertible bonds outstanding. The coupon rate is 8.59% with the coupon payable every six months. The yield is 7.33% compounded semi-annually. The maturity is on July 2, Year 14 (i.e. in 9.5 years), and the coupon is payable every January 2 and July 2. Each $1,000 face value convertible bond converts into 59 XYZ shares. The XYZ shares are currently trading at $18.73 per share. The delta of long-dated, at-the-money XYZ call options is 0.8 and is not expected to change with short-term changes in prices of the underlying. Comparable plain-vanilla (non-convertible) bonds with the same maturity, coupon, and credit risk are yielding 7.75%. What is the revised expected price of one convertible bond today if the plain-vanilla bond yields drop by 25 basis points and the share price rises to $20.99 per share? O $1,088.27 O $1,118.50 $1,148.73 O $1,178.96 O $1,209.19 Today is the morning of Jan 2, Year 5. XYZ Inc has exchange-listed convertible bonds outstanding. The coupon rate is 8.59% with the coupon payable every six months. The yield is 7.33% compounded semi-annually. The maturity is on July 2, Year 14 (i.e. in 9.5 years), and the coupon is payable every January 2 and July 2. Each $1,000 face value convertible bond converts into 59 XYZ shares. The XYZ shares are currently trading at $18.73 per share. The delta of long-dated, at-the-money XYZ call options is 0.8 and is not expected to change with short-term changes in prices of the underlying. Comparable plain-vanilla (non-convertible) bonds with the same maturity, coupon, and credit risk are yielding 7.75%. What is the revised expected price of one convertible bond today if the plain-vanilla bond yields drop by 25 basis points and the share price rises to $20.99 per share? O $1,088.27 O $1,118.50 $1,148.73 O $1,178.96 O $1,209.19
Expert Answer:
Answer rating: 100% (QA)
Option a 108827 discount factor present cash period cash flow 3665 flow 1 4295 0965 4... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
Students also viewed these accounting questions
-
The common shares of a firm are currently trading at $10.00, while its preferred shares trade at par. Calculate the convertible premium on the preferred shares. What does this premium mean?
-
The shares of Corines Candies Inc. are currently trading at $18.20. There are four million shares outstanding. The companys 2012 net income was $5.2 million. Find the market value of equity for the...
-
You are required to select an organization(Nokia) where you will be elaborating their existing HR practices. the text under study will be the guideline to identify the scope and areas to be covered....
-
Determine the reactions at the beam supports for the given loading when wO = 400 lb/ft. 300 lb/ft A. 5 ft
-
The following information is available for Tomlin Company. Prepare the cost of goods manufactured schedule for the month of April. Raw materials inventory Work in process inventory Apil April 30...
-
Rebeccanne, Inc. has assembled the following data for the year ended December 31, 2025: Prepare Rebeccanne, Inc.s statement of cash flows using the indirect method. Include an accompanying schedule...
-
A consumer advocacy agency, Equitable Ernest, is interested in providing a service that allows an individual to estimate their own credit score (a continuous measure used by banks, insurance...
-
Haifa Instruments, an Israeli producer of portable kidney dialysis units and other medical products, develops an 8-month aggregate plan. Demand and capacity (in units) are forecast as shown in the...
-
On July 1 of Year 1, West Company purchased for cash, eight $10,000 bonds of North Corporation to yield 10%. The bonds pay 9% interest, payable on a semiannual basis each July 1 and January 1, and...
-
Question 4 (15 points) Stata Statistical Software Inc. has reached maturity and now expects to generate earnings before interest and taxes of EBIT=$1,000,000 per year in perpetuity. That is, no...
-
On June 30, 2024, the Esquire Company sold merchandise to a customer and accepted a noninterest-bearing note in exchange. The note requires payment of $49,000 on March 31, 2025. The fair value of...
-
Are head football and basketball coaches worth the money they are paid?
-
If your college were invited to the New Mexico Bowl, would you favor accepting the bid? Why or why not?
-
Lets say that New Venture Fitness Drinks was interested in hiring a new chief executive officer (CEO) and was interviewing the CEOs of three small restaurant chains. To get a sense of how savvy each...
-
Indicate whether each of the following statements is true or false by writing T or F in the answer c olumn. Warranties are promises or statements made by manufacturers or sellers.
-
How do changes in productivity affect the opportunity cost of nuts?
-
Consider the hex strings A=0x0647f94cde09012f and B=0x 1c8f7dda7c7357ef. a) What is A + B in hexadecimal? Please give your answer a leading Ox and use lowercase letters only. Make sure you use...
-
1. Firms may hold financial assets to earn returns. How the firm would classify financial assets? What treatment will such financial assets get in the financial statements in accordance with US GAAP...
-
Perfectionist Construction Company was the low bidder on an office building construction contract. The contract bid was $9,000,000, with an estimated cost to complete the project of $7,000,000. The...
-
McKeon Machine Company has outstanding a $210,000 note payable to Tejon Investment Corporation. Because of financial difficulties, McKeon negotiates with Tejon to exchange inventory of machine parts...
-
You are the chief financial officer of a local manufacturing company, Larsen Enterprises. This company is run by two brothers, Steve and John Larsen. The Larsen brothers have built this company up...
-
Climates farther from the equator usually have (a) lower average temperatures. (b) higher solar intensity. (c) more precipitation. (d) more water.
-
Climate change (a) is a subject most scientists disagree about. (b) refers to the effect of greenhouse gases on atmospheric temperature. (c) refers to temperature increases in all of Earths climate...
-
How is a tsunami similar to a ripple in a pond? How do they differ?
Study smarter with the SolutionInn App