Convert the bond into common stock and then sell the stock

Assignment Help Financial Management
Reference no: EM131847809

Suppose you own a convertible bond that has a conversion ratio equal to 50. Each convertible bond has a face value equal to $1,000. The current market value of the company’s common stock is $19, and the bond is selling for $980. If you want to liquidate your position today because you need money to pay your rent, should you sell the bond or should you convert the bond into common stock and then sell the stock?

Reference no: EM131847809

Questions Cloud

Relative strength measures the performance of stock : Relative Strength: Relative Strength measures the performance of a stock against a "bogey", which is either another stock or suitable index.
What is the initial price of this bond : What is the initial price of this bond if it has a 5% yield to maturity? what will the price be immediately before the first coupon is paid?
Highest price stock can go before she receives margin call : Louisa short sold 700 shares of Celpa stock at $35 share at an initial margin of 55 percent. What is highest price stock can go before she receives margin call.
What is wrong with the board logic : What is wrong with the board’s logic? What is the IRR on the investment?
Convert the bond into common stock and then sell the stock : should you sell the bond or should you convert the bond into common stock and then sell the stock?
General electric using recent stock and dividend information : Paper on General Electric using recent stock and dividend information, its current operations and future prospects.
What is the present value of security : What is the present value of a security that will pay $33,000 in 20 years if securities of equal risk pay 4% annually?
Construct balance sheet depicting this transaction : Construct a balance sheet depicting this transaction. Label each item such as Equity and so on.
What amount will be in your account after six years : You plan to deposit $1,500 per year for 6 years into a money market account with an annual return of 3%. What amount will be in your account after 6 years?

Reviews

Write a Review

Financial Management Questions & Answers

  Calculate the Cash Flow DOL for this firm

The law firm of Dewey, Cheatem, and Howe has monthly fixed costs of $98,000, EBIT of $223,000, and depreciation charges on its office furniture and computers of $7,000. Calculate the Cash Flow DOL for this firm.

  Mutual funds provide reliable for information on mutual fund

Sources such as the Morningstar Mutual Funds provide reliable for information on mutual funds.

  What is expected rate of return

Walter Utilities is a dividend-paying company and is expected to pay an annual dividend of $1.85 at the end of the year. what is the expected rate of return?

  About the price is right-what is the present value

Much to your surprise, you were selected to appear on the TV show "The Price is Right". As a result of your powers in identifying how many rolls of toilet paper a typical American family keeps on hand, you win the opportunity to choose one of the fol..

  E-purchasing has allowed individual departments

In the early 21st century, e-Purchasing has allowed individual departments to purchase many items that were once purchased by a central purchasing agent. What kinds of issues may this cause based on the information you have learned thus far in this c..

  Determine the payback period for project

Financial Appraisals Inc. is considering purchasing new software. Determine the payback period (in years) for this project. Software initial cost is $56,000 and would yield after-tax cash flows of $14,000 the first year, $16,000 the second year, $19,..

  Due to technological improvements

Your company has been approached to bid on a contract to sell 5,200 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible.

  Savings account as perpetual trust

Linda O’Shay deposited $30,000 in a savings account as a perpetual trust. She believes the account will earn 7% annual interest during the first 10 years and 5% thereafter. The trust is to provide a uniform end-of-year scholarship at the university. ..

  What are the current yield and capital gains yield

One year ago, Henderson Honey issued a 10-year bond for $1,000. The bond’s coupon rate of interest is 4 percent, and interest is paid annually. If the current value of the bond is $929, what are (a) the current yield and capital gains yield Henderson..

  What is standard deviation of the portfolio

Stock A’s expected return and standard deviation are E[RA] = μA = 6% and σA = 12%, while stock B’s expected return and standard deviation are E[RB] = μB = 10% and σB = 20%. How would you construct a portfolio with expected return of 8% using stock A ..

  What is project discounted payback

Project L costs $50,000, its expected cash inflows are $12,000 per year for 8 years, and its WACC is 12%. What is the project's discounted payback?

  Shareholders are more apt to prefer high dividend payout

Shareholders are more apt to prefer a high dividend payout if the firm:

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd