Sakura Berhad has the following convertible bond outstanding.

Total amount issued= RM 5 million
Coupon 5%= annual basis
Maturity =10 years
Conversion ratio= 20 shares
Current market share price= RM4.50
No. Of share outstanding =3 million
Corporate Tax= 25%
It is determined that other competitive convertible bonds in the market are giving an average yield of 6% . REQUIRED:
Calculate the below :

a) Conversion price
b) Conversion value
c) Number of additional shares that would have to be issued , if the bonds are fully converted.
d) The straight bond value of the convertible
e) The stock value of the convertible
f) The minimum price that the bond should trade in the market
g) Explain FIVE (5) factor affecting the price of a share option. Provide examples.

Answer rating: 100% (QA)

a Conversion price The conversion price is the price at which the bonds can be converted into shares It is calculated by dividing the face value of the bond by the conversion ratio For this bond the c... View the full answer