# You have been hired to value a new 25-year callable, convertible bond. The bond has a 4.8 percent coupon, payable

## Question:

You have been hired to value a new 25-year callable, convertible bond. The bond has a 4.8 percent coupon, payable annually. The conversion price is \$9, and the stock currently sells for \$3.21. The stock price is expected to grow at 11 percent per year. The bond is callable at \$120, but, based on prior experience, it won’t be called unless the conversion value is \$130. The required return on this bond is 8 percent. What value would you assign? Par value of the bond is \$100.

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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## Fundamentals of Corporate Finance

ISBN: 978-0071051606