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Calculate the conversion value of the bond

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Question - Determining values

Convertible bond The Volkswagen Group has just issues a convertible bond with a 1000 par value. The bond is convertible into 20 shares of common stock. It has 3% coupon rate and a 10-year maturity. The interest rate on a straight bond of similar risk is currently 5%.

Required -

a. Calculate the straight bond value of the bond.

b. Calculate the conversion (or stock) value of the bond when the market price of the common stock is 40, 45, 50, 53 and 55 per share.

Reference no: EM132602990

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