You are the CFO of RealNetworks on July 1, 2008. The company’s stock price is $9.70 and its convertible debt (as shown in Table 15.7 ) is now callable.
a. What is the value of the shares the bondholders would receive per $1000 bond if they convert?
b. What is the value per $1000 bond they would receive under the call?
c. If you call the bonds, will the bondholders convert into shares or accept the call price?

Table 15.7

Real Networks’ 2003 Convertible Debt Issue

Aggregate principal amount............................ $100 million
Proceeds net of offering costs........................ $97.0 million
Coupon................................................................ 0%
Conversion ratio.................................................107.5650 shares per $1000 principal amount
Call date............................................................... July 1, 2008
Call price............................................................. 100%
Maturity.............................................................. July 1, 2010