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Calculate the conversion for stock value of the bond

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Reference no: EM133089768

Question - Determining values-Convertible bond - Craig's Cake Company has an outstanding issue of 16-year convertible bonds with a $20M par value. These bonds are convertible into 65 shares of common stock. They have a 15% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%.

Required -

a. Calculate the straight bond value of this bond.

b. Calculate the conversion for stock value of the bond when the market price is $20 per share of common stock.

c. What is the minimum market value of the bond?

Reference no: EM133089768

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