Problem 15-02 Given the following information concerning a convertible bond Coupon: 6 percent ($60 per $1,000 bond) Exercise price: $24 Matunity date: 15 years Call price: $1,050 Price of the common stock: $30 . If this bond were non convertible, what would be its approximate value if comparable interest rates were 8 percent? Assume that the bond pays interest annually. Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar, $ b. How many shares con the bond be converted into? Round down your answer to the nearest whole number shares What is the value of the bond in terms of stock? Use the number of shares into which the band may be converted into from part a Round your answer to the nearest dollar 5 d. What is the current minimum price that the bond will command? Round your answer to the nearest dollar $ e is there any reason to anticipate that the firm will call the band? The price of the stock is Select the bond's exercise price. So the firm select force conversion by calling the bond What do investors receive if they do not convert the bond when it is called? Round your answer to the nearest dollar $ g. If the bond were called, would it be advantageous to convert? It select advantageous to convert since the band's value as stock is Belect the call price Interest Factors for the Present Value of One Dollar 5% Time Period (e.g. year) 1 2 3 4 5 952 1% 990 980 971 961 951 WN 2% 980 961 942 924 906 3% 971 943 915 889 863 962 925 889 855 822 6% 943 890 .840 .792 .747 907 .864 823 784 7% 935 873 816 763 713 8% 926 857 794 735 681 9% 10% 917 909 842 826 772 .751 708 683 650 621 14% 877 769 .675 12% 893 797 712 1636 567 15% .870 756 658 572 497 16% .862 1743 641 552 476 18% 847 .718 609 516 .437 20% .833 .694 .579 482 402 24% 806 650 524 423 341 28% 781 610 477 373 291 592 519 6 7 8 9 10 942 933 923 914 905 888 871 .853 837 820 838 813 789 766 744 1790 .760 731 703 .676 746 711 .677 645 614 -705 .665 .627 592 558 .666 .623 582 544 508 630 583 540 500 463 596 547 502 460 422 564 513 467 424 386 507 452 404 361 322 456 400 351 308 270 432 376 .327 284 247 .410 354 305 263 227 370 314 266 226 191 335 279 233 194 .162 275 222 .179 144 .116 227 178 139 108 085 11 12 13 14 15 896 887 879 870 861 804 788 -773 758 1743 722 701 4681 661 642 650 625 .601 527 555 585 557 530 505 481 527 497 469 442 417 475 444 415 388 362 429 397 368 1340 315 388 356 326 .299 275 350 319 290 263 239 287 257 229 205 183 237 208 182 215 187 .163 195 168 .145 .125 108 162 137 .116 099 084 135 .112 093 078 4065 094 076 061 049 040 066 052 040 032 025 160 141 140 123 16 17 18 19 20 853 844 836 828 820 1728 714 1700 .686 673 623 605 587 570 554 534 513 494 475 456 458 436 416 395 377 394 371 350 1331 312 339 317 296 276 258 292 1270 250 232 215 252 231 212 194 178 218 .198 180 164 149 163 146 130 116 104 123 108 095 083 ,073 107 093 081 070 061 093 080 .069 060 051 .071 060 051 043 037 054 045 038 031 026 032 026 021 017 014 019 2015 012 009 007 25 .780 .610 .478 375 295 233 184 .146 116 .092 059 038 030 024 2016 010 ,005 002 30 742 552 .412 308 1231 174 .131 099 075 057 033 020 015 012 2007 004 002 2001 Interest Factors for the Present Value of an Annuity of One Dollar 3% * * Time Period le... year) 1 2 3 4 5 1% 2% 3% 5% 6% 7% 99% 10% 12% 14% 16% 18% 20% 24% 28% 32% 36% 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.893 0.877 0.862 0.847 0.833 0.806 0.781 0.758 0.735 1970 1942 1913 1.886 1.859 1833 1.808 1.783 1759 1.736 1.690 1.647 1.605 1.566 1.528 1.457 1392 1.332 1.276 2941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2487 2.402 2322 2.246 2.174 2.106 1981 1,868 1.766 1674 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.037 2.914 2.798 2.690 2.589 2.404 2.241 2.096 1.966 4.853 4.713 4580 4.452 4329 4.212 4.100 3.993 3.890 3.791 3.605 3.433 3.274 3.127 2.991 2.745 2.532 2.345 2.181 6 7 8 9 10 5.795 5.601 5.417 5.242 5.076 4.917 4.766 4.623 4.486 4355 4.111 3.889 3685 3.498 3.326 3.020 2.759 2.534 2399 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868 4.564 4.288 4.039 3.812 3,605 3.242 2.937 2.678 2455 7.652 7.325 7,020 6.733 6.463 6.210 5.971 5.747 5.535 5.335 4968 4.639 4 344 4.078 3.837 3.421 3.076 2.786 2.540 8.566 8.162 7786 7435 7108 6.802 6.515 6.247 5.985 5.759 5328 4.946 4.607 4,303 4.031 3.566 3.184 2.868 2.603 9.471 8.983 8.530 8.111 7722 7.360 7.024 6.710 6.418 6.145 5.650 5.216 4.833 4.494 4.193 3.682 3.269 2.930 2.650 - 11 12 13 14 15 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495 5.988 5.453 5.029 4.656 4.327 3.776 3.335 2.978 2.683 11.255 10.575 9.954 9.385 8.863 8.384 7943 7536 7.161 6.814 6.194 5.660 5.197 4.793 4.439 3.851 3.387 3.013 2.708 12.134 11.348 10.635 9.986 9.394 8.534 8.358 7904 7487 7103 6.424 5.842 5.342 4910 4.533 3.912 3.427 3.040 2.727 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7367 6.628 6.002 5.468 5.008 4.611 3.962 3.459 3.061 2.740 13,865 12.849 11.938 11.118 10 380 9.712 9.108 8.559 8,060 7606 6.811 6.142 5.575 5.092 4.675 4.001 3.483 3.076 2.750 16 17 18 19 20 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.312 7.824 6.974 6.265 5.669 5.162 4.730 4,003 3.503 3.088 2.758 15.562 14.292 13.166 12.166 11,274 10.477 9763 9.122 8.544 8,002 7.120 6.373 5.749 5.222 4.775 4,059 3.518 3.097 2.763 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.2017.250 6.467 5.818 5.273 4812 4.080 3.529 3.104 2.767 17.226 15.678 14,324 13,134 12.085 11.158 10.336 9.604 8.950 8.365 7.366 6,550 5,877 5.316 4.844 4.097 3.539 3.109 2.770 18.046 16.351 14.877 13 590 12.462 11.470 10.594 9.818 9.128 8.514 7,469 6.623 5.929 5.353 4.870 4.110 3.5463.113 2772 25 22.023 19.523 17413 15.622 14.094 12.783 11,654 10.675 9.8239.077 7.843 6.873 6.097 5.467 4.948 4.147 3.564 3.122 2.776 30 25.808 22.937 19.600 17.292 15.373 13.765 12.409.11.258 10.274 9.427 8.055 2003 6.177 5.517 4979 4.160 3.569 3.124 2.778