Sherwood Forest Products has a convertible bond quoted in the bond market at 95. (Bond quotes represent

Question:

Sherwood Forest Products has a convertible bond quoted in the bond market at 95. (Bond quotes represent percentage of par value. Thus, 70 represents $700, 80 represents $800, and so on.) It matures in 10 years and carries a coupon rate of 6.5 percent. The conversion ratio is 25, and the common stock is currently selling for $35 per share on the TSX. The bond maturity value is $1,000.
a. Compute the conversion premium.
b. At what price does the common stock need to sell for the conversion value to be equal to the current bond price?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... 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... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...

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