FREE Trial

Convertible Calculations Rayne Inc., has a $ 1.000 face value convertible bond issue that is currently selling

Question:

Convertible Calculations Rayne Inc., has a $ 1.000 face value convertible bond issue that is currently selling in the market for $950. Each bond is exchangeable at any time for 25 shares of the company’s stock. The convertible bond has a 7 percent coupon payable semiannually. Similar nonconvertible bonds are priced to yield 10 percent. The bond matures in 10 years. Stock in Rayne sells for $36 per share.

a. What are the conversion ratio, conversion price, and conversion premium?

b. What is the straight bond value the conversion value?

c. In part (b), what would the stock price have to be for the conversion value and the straight bond value to be equal?

d. What is the option value of the bond?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 62% (8 reviews)

a The conversion ratio is given at 25 The conversion price is the par value divided by the conversio...View the full answer


answer-question-section
Answered By
tutor-profile-image
Ashington Waweru
I am a lecturer, research writer and also a qualified financial analyst and accountant. I am qualified and articulate in many disciplines including English, Accounting, Finance, Quantitative spreadsheet analysis, Economics, and Statistics. I am an expert with sixteen years of experience in online industry-related work. I have a master's in business administration and a bachelor’s degree in education, accounting, and economics options. I am a writer and proofreading expert with sixteen years of experience in online writing, proofreading, and text editing. I have vast knowledge and experience in writing techniques and styles such as APA, ASA, MLA, Chicago, Turabian, IEEE, and many others. I am also an online blogger and research writer with sixteen years of writing and proofreading articles and reports. I have written many scripts and articles for blogs, and I also specialize in search engine I have sixteen years of experience in Excel data entry, Excel data analysis, R-studio quantitative analysis, SPSS quantitative analysis, research writing, and proofreading articles and reports. I will deliver the highest quality online and offline Excel, R, SPSS, and other spreadsheet solutions within your operational deadlines. I have also compiled many original Excel quantitative and text spreadsheets which solve client’s problems in my research writing career. I have extensive enterprise resource planning accounting, financial modeling, financial reporting, and company analysis: customer relationship management, enterprise resource planning, financial accounting projects, and corporate finance. I am articulate in psychology, engineering, nursing, counseling, project management, accounting, finance, quantitative spreadsheet analysis, statistical and economic analysis, among many other industry fields and academic disciplines. I work to solve problems and provide accurate and credible solutions and research reports in all industries in the global economy. I have taught and conducted masters and Ph.D. thesis research for specialists in Quantitative finance, Financial Accounting, Actuarial science, Macroeconomics, Microeconomics, Risk Management, Managerial Economics, Engineering Economics, Financial economics, Taxation and many other disciplines including water engineering, psychology, e-commerce, mechanical engineering, leadership and many others. I have developed many courses on online websites like Teachable and Thinkific. I also developed an accounting reporting automation software project for Utafiti sacco located at ILRI Uthiru Kenya when I was working there in year 2001. I am a mature, self-motivated worker who delivers high-quality, on-time reports which solve client’s problems accurately. I have written many academic and professional industry research papers and tutored many clients from college to university undergraduate, master's and Ph.D. students, and corporate professionals. I anticipate your hiring me. I know I will deliver the highest quality work you will find anywhere to award me your project work. Please note that I am looking for a long-term work relationship with you. I look forward to you delivering the best service to you.
3.00+ 2+ Reviews 10+ Question Solved
Related Book For  book-img-for-question
Fundamentals of Corporate Finance

Fundamentals of Corporate Finance

ISBN: 978-0077861629

8th Edition

Authors: Stephen A. Ross, Randolph W. Westerfield, Bradford D.Jordan

See More Books
Question Posted:
See More Questions

Related Video

Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.

Students also viewed these Corporate Finance questions

Fluid Power Circuits And Controls Fundamentals And Applications 1st Edition - ISBN: 0849309247 - Free Book