Meritage Homes issued 10-year, 3% convertible bonds (1,000 bonds), face amount $1 million, on 1/1/2018 for...

Transcribed Image Text:

Meritage Homes issued 10-year, 3% convertible bonds (1,000 bonds), face amount $1 million, on 1/1/2018 for $1,089,826 (to yield 2%). The bond's coupon rate is payable annually on 12/31. At the issuer's option, each $1,000 bond can be converted into ten shares of $1 par common stock or settled in cash for the conversion value. If the bond had been sold alone (without the conversion feature), the effective rate/yield would have been 3%. How much will be assigned to equity (Common Stock & APIC) upon conversion if the bonds are converted on 1/1/2022 when the stock has a market value of $150/share? Round to the nearest dollar. Meritage Homes issued 10-year, 3% convertible bonds (1,000 bonds), face amount $1 million, on 1/1/2018 for $1,089,826 (to yield 2%). The bond's coupon rate is payable annually on 12/31. At the issuer's option, each $1,000 bond can be converted into ten shares of $1 par common stock or settled in cash for the conversion value. If the bond had been sold alone (without the conversion feature), the effective rate/yield would have been 3%. How much will be assigned to equity (Common Stock & APIC) upon conversion if the bonds are converted on 1/1/2022 when the stock has a market value of $150/share? Round to the nearest dollar.

Answer rating: 100% (QA)

To determine the amount assigned to equity upon conversion ... View the full answer