Jane just purchased a Nvidia 25-year convertible bond with a coupon rate of 9%.The bond has a face value of $1,000 and has a conversion ratio of 4. Jane paid $1,050 forthe bond. Similar Nvidia bonds without the conversion feature have a coupon rate of 12%and currently sell for $950. Nvidia is currently not paying any dividends and the stockprice is currently $275. Answer the following problems:a.) After one year, Nvidia’s stock price has risen to $375. Jane converts her bond and sellsimmediately. What is her return on her investment?b.) What would have been the one-year return had Jane invested in the straight bond(without the conversion) assuming interest rates are flat?c.) What would Jane’s return have been had she just invested in the stock?d.) What would the returns of these 3 investments been if the stock price had fallen by$100?

 IBM just reported earnings and their stock sold off in the market. IBM reported epsfor full year 2021 of $12.20. They also just paid a dividend of $6.28. Analysts expectearnings growth of 8% over the next few years. Your boss asks you to put together a quickvaluation of the company to assess whether it could be undervalued. IBM has a beta of 1.23and the risk-free rate and market rate of return are 2.5% and 9.5%, respectively. Assumethe following:a. IBM is expected to grow at 8% for the next 4 years, then settle into a secular growthrate of 4%. IBM intends to maintain a constant payout ratio. IBM is currentlytrading at $129. What is your intrinsic value for IBM?b. What is the percentage return to fair value?c. What secular growth rate does IBM’s current stock price imply?

Answer rating: 100% (QA)

a After one year Nvidias stock price has risen to 375 Jane converts her bond and sells immediately What is her return on her investment First lets calculate the total amount Jane will receive after co... View the full answer