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

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 bond?s conversion value?

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

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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Question Posted: Jun 09, 2011 05:31 AM

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

Question:

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

Step by Step Answer:

a With a 1000 face value for the bonds a bondholder can convert one bond into 100025 40 shares ...View the full answer

Principles of Corporate Finance

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