Calculate the conversion value of each bond

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Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,400, can be converted into common shares at a rate of 61.2997 shares of stock per $1,400 face value bond (the conversion rate), or $22.8386 per share. Hilton’s common stock is trading (on the NYSE) at $22.42 per share and the bonds are trading at $1,375.

a. Calculate the conversion value of each bond. (Round your answer to 2 decimal places. (e.g., 32.16))

Conversion value $

b. State whether it is currently profitable for bond holders to convert their bonds into shares of Hilton Hotels common stock.

Reference no: EM131873214

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