This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: You own a $1,000 par value convertible bond with a 6% coupon rate. The bond is convertible into 20 ... (Read 75 times)

iveyjurea

  • Hero Member
  • *****
  • Posts: 555
on: Apr 14, 2019

Question 1

The advantage of a convertible bond to the investor is


◦ higher coupon interest rates.
◦ ability to "own the upside" if the company performs well.
◦ convertibility protects the investor if the stock decreases in value.
◦ none of these are advantages.

Question 2

You own a $1,000 par value convertible bond with a 6% coupon rate. The bond is convertible into 20 shares of stock at the investor's discretion. The stock price has reached $51 per share with a $1 per share annual dividend, but you do not forecast any further price appreciation in the stock. Should you make the conversion?


◦ No, 20 shares of stock are not worth $1,000.
◦ Yes, since the stock is worth $51 per share it is worth more than the bond.
◦ No, the total stock is only worth $20 more than the bond, and you would lose $40 in annual cash flow based on the coupon rate versus the dividend.
◦ Yes, while the stock is only worth $20 more in total than the bond, you will receive an annual $1 per share dividend.
Personal Finance ¦ Madura ¦ 6th Edition
Buy Test-Bank


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by iveyjurea on Apr 14, 2019

peter

  • Sr. Member
  • ****
  • Posts: 330
Reply #1 on: Apr 14, 2019
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 55% of students answer this correctly


iveyjurea

  • Member
  • Posts: 555
Reply 2 on: Apr 14, 2019
Gracias!

triiciiaa

  • Member
  • Posts: 349
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Cyanide works by making the human body unable to use oxygen.

Did you know?

Anesthesia awareness is a potentially disturbing adverse effect wherein patients who have been paralyzed with muscle relaxants may awaken. They may be aware of their surroundings but unable to communicate or move. Neurologic monitoring equipment that helps to more closely check the patient's anesthesia stages is now available to avoid the occurrence of anesthesia awareness.

Did you know?

Urine turns bright yellow if larger than normal amounts of certain substances are consumed; one of these substances is asparagus.

Did you know?

For about 100 years, scientists thought that peptic ulcers were caused by stress, spicy food, and alcohol. Later, researchers added stomach acid to the list of causes and began treating ulcers with antacids. Now it is known that peptic ulcers are predominantly caused by Helicobacter pylori, a spiral-shaped bacterium that normally exist in the stomach.

Did you know?

In the United States, there is a birth every 8 seconds, according to the U.S. Census Bureau's Population Clock.

Changes in metabolic rate of selected structures in a mammal's body during different activities Changes in metabolic rate of selected structures in a mammal's body during different activities
Rate enhancement by entropy reduction Rate enhancement by entropy reduction
Carbon dioxide. This molecule exhibits a nonpolar bond and results in a linear and symmetrical ... Carbon dioxide. This molecule exhibits a nonpolar bond and results in a linear and symmetrical ...
The level of future emissions is closely linked to the rate of population growth The level of future emissions is closely linked to the rate of population growth
Effect of Increasing the Investment Rate on the Steady State Effect of Increasing the Investment Rate on the Steady State
Explain the myogenic autoregulation of the glomerular filtration rate Explain the myogenic autoregulation of the glomerular filtration rate
Video: Optic Nerve and Optic Disk Animation (Part 1 of 2)

For a complete list of videos, visit our video library