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Can the market price be less than the conversion value

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Maple Aircraft has issued a 4¾% convertible subordinated debenture due 3 years from now. The conversion price is $47.00 and the debenture is callable at 102.75% of face value. The market price of the convertible is 91% of face value, and the price of the common is $41.50. Assume that the value of the bond in the absence of a conversion feature is about 65% of face value.

Problem 1: In the absence of the conversion feature, what is the current yield and yield to maturity?

Problem 2: What is the conversion ratio of the debenture?

Problem 3: If the conversion ratio were 50, what would be the conversion price?

Problem 4: What is the conversion value?

Problem 5: At what stock price is the conversion value equal to the bond value?

Problem 6: Can the market price be less than the conversion value?

Problem 7: How much is the convertible holder paying for the option to buy one share of common stock?

Problem 8: By how much does the common have to rise after 3 years to justify conversion?

Reference no: EM132962636

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