Convertible bond assuming you want the bond to trade at par

Assignment Help Financial Management

Reference no: EM131904275

Your company needs $100 Million for expansion and decides to issue a 5-year convertible bond. The stock price currently is $41.67 and your banker recommends a 20% conversion premium. The total option value of the convertible will be $92.22 per $1,000 face amount of bond. The company's current cost of 5-year debt is 3% assuming semi-annual interest payments.

What should be the annual coupon of the convertible bond assuming you want the bond to trade at par? The coupon will be paid semi-annually.

How many shares will each $1,000 bond convert?

What is the return for an investor if the stock price in 5 years is 60?

Reference no: EM131904275

Questions Cloud

Firm is considering purchasing new milling machine : A firm is considering purchasing a new milling machine and has collected the following information for its income statement and cash flow statement.

What is the initial outlay for project : What is the initial outlay (IO) for this project? What is the operating cash flows (OCF) for each of the years for this project?

Company should be willing to make at the auction : Given the following information and using Black- Scholes model, calculate the maximum bid that the company should be willing to make at the auction.

According to the covered interest rate parity relationship : According to the Covered Interest Rate Parity relationship, what should be the 3-month Forward rate (F) of USD to AUD?

Convertible bond assuming you want the bond to trade at par : What should be the annual coupon of the convertible bond assuming you want the bond to trade at par? T

Triangular arbitrage : Suppose you start with USD 100,000, and do one round of "triangular arbitrage", that is convert make total of 3 foreign exchange transactions to start from Usd

Convert the interest payments to floating rate liability : How can the company use a swap to convert the interest payments to a floating rate liability?

Fixed rate and offsetting floating rate swap : what is the approximate profit that a bank erns by entering into both a fixed rate and an offsetting floating rate swap?

Calculate the present value of the share : After that the company will grow at a normal rate of 8 per cent per annum. Calculate the present value of the ABC share.

User Account

All Pages