Convertible Bond Analysis

issued.

$\%$

as $25\mathrm{.}5.$ Round your answer to two decimal places.

$

million per year

c$.$ At the time the bonds were issued, what was the value per bond of the conversion feature? Do not round intermediate calculations. Round your answer to the nearest cent.

$

per bond

What is the current price of the straight$-$bond portion of the convertible bond? Do not round intermediate calculations. Round your answer to the nearest cent. Enter all amounts as a positive number.

$

What is the current value if a bondholder converts a bond? Do not round intermediate calculations. Round your answer to the nearest cent.

$

per share

Do you think it is likely that the bonds will be converted?

$($Assume no change in the standard deviation of stock returns.$)$ Round your answers to the nearest cent. Enter all amounts as a positive number.

The value of straight bond would have

from $

at the time of issue to $

fifteen years later.

number.

$

per bond

What is the current value if a bondholder converts a bond? Do not round intermediate calculations. Round your answer to the nearest cent.

$

per share

What do you think would have happened to the price of the bonds?Fifteen years ago, Roop Industries sold $$400$ million of convetible bonds. The bonds had a $40-$year maturity, a $5\mathrm{.}75\%$ coupon rate, and paid interest annually. They were sold at their $$1,000$ par value. The conversion price was set at $$62\mathrm{.}75,$ and the common stock price was $$55$ per share. The bonds were subordinated debentures and were given an A rating; straight nonconvertible debentures of the same quality yield about $8\mathrm{.}75\%$ at the time Roop's bonds were issued. What is Roop's annual before$-$tax interest savings on the convertible issue versus a straight$-$debt issue?