The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2001 Each bond has the following features (a) What is the bond s conversion value (b) Can you explain why the bond is selling above conversion value (c) Should Surplus call What will happen if it does so Par or face value Conversion price Current call price Current trading price Maturity Current stock price $1000 $25 105 (percent of face value) 130 (percent of face value) 2011 $30 (per share) 10 (coupon as percent of face value) Interest rate

Question: The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2001. Each bond has the following features: (a) What is the

The Surplus Value Company had $10 million (face value) of convertible bonds outstanding in 2001. Each bond has the following features:

Par or face value Conversion price Current call price Current trading price

(a) What is the bond?s conversion value?

(b) Can you explain why the bond is selling above conversion value?

Par or face value Conversion price Current call price Current trading price Maturity Current stock price $1000 $25 105 (percent of face value) 130 (percent of face value) 2011 $30 (per share) 10 (coupon as percent of face value) Interest rate

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