User Account

All Pages

Convertible bonds outstanding

Assignment Help Financial Management
Reference no: EM131527196

Vernon Glass Company has $30 million in 10 percent convertible bonds outstanding. The conversion ratio is 40, the stock price is $18, and the bond matures in 25 years. The bonds are currently selling at a conversion premium of $45 over their conversion value.

If the price of the common stock rises to $24 on this date next year, what would your rate of return be if you bought a convertible bond today and sold it in one year? Assume on this date next year, the conversion premium has shrunk from $45 to $20. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Rate of return %

Reference no: EM131527196

Questions Cloud

Early exercise of the call option is optimal : what is the maximum strike price where it could be possible that early exercise of the call option is optimal?
Discuss about the feelings of the american public : What did those changes, in your view, reflect about the feelings of the American public
Discuss the prudent investment strategy : In the March 30, 2005, issue of The Chicago Sun Times, there is an article by Eric Herman, entitled "Wrigley Opening Facilities Here and Around the World."
Why americans initially wanted to stay out of the conflict : Give at least two (2) reasons why Americans initially wanted to stay out of the conflict that would become World War II
Convertible bonds outstanding : Vernon Glass Company has $30 million in 10 percent convertible bonds outstanding.
What is the operating margin for this year : Yahoo.com's finance Internet site provides summary financial information about public companies, such as stock quotes, recent financial filings.
Fitco is considering purchase of new equipment : FITCO is considering the purchase of new equipment. FITCO is in the 40 percent tax bracket, and its cost of capital is 9 percent.
Under the effective interest rate method : The cash amount of interest paid to a bond holder is based on which of the following under the effective interest rate method?
Prepare a retained earnings statement : After its second year of operations, the following amounts were taken from the accounting records of Rainbow Consulting Services, Inc., as of July 31, 2008.

Reviews

Write a Review

Financial Management Questions & Answers

  How much interest will refinancing save

A person purchased a $207,038 home 10 years ago by paying 10% down and signing a 30-year mortgage at 8.7% compounded monthly. Interest rates have dropped and the owner wants to refinance the unpaid balance by signing a new 30-year mortgage at 4.% com..

  Compute the net cash flow

A U.S. firm is expected to receive a floating rate of (LIBOR+125 bps) on €5 million for four years. Payments will be made annually. The current exchange rate is $1.06 / €. The company wants to hedge its interest rate risk so it enters into a swap: re..

  What is the firm-specific variance of your portfolio

Suppose that the index model for stocks A and B is estimated from excess returns with the following results: What is the standard deviation of What is the firm-specific variance of your portfolio?

  Determine which will give her the higher rate of return

Karen is considering the following two investment choices. Do the necessary computation and determine which will give her the higher rate of return? Please note that we express 18 months as 1.5 year (18/12 =1.5). Invest $1,000 in an account for 18 mo..

  Commercial loans with an average duration

If Main Street Bank has $100 million in commercial loans with an average duration of 0.40 years; $40 million in consumer loans with an average duration of 1.75 years; and $30 million in U.S. Treasury bonds with an average duration of 6 years, what is..

  What is the projects initial investment outlay

Leaf It To Us Corporation is considering an expansion project. The necessary equipment could be purchased for $22,287,200 and shipping and installation costs are another $14,220. The project will also require an initial $156,699 investment in net wor..

  Equity multiplier and profit margin

If Roten Rooters, Inc., has an equity multiplier of 1.65, total asset turnover of 1.70, and a profit margin of 4.5 percent, what is its ROE?

  Firm needs to plow back its earnings to fuel growth

No dividends will be paid on stock over next 10 years because the firm needs to plow back its earnings to fuel growth.

  Billboard advertising space would be period cost

Billboard advertising space would be period cost, not a product cost. Product costs attach can also be described as "inventoriable."

  What was the risk-free rate of return

Over the past ten years, large-company stocks have returned 19.08 percent. The risk premium on these stocks was 3.31 percent and the inflation rate was 3.7 percent. What was the risk-free rate of return?

  Convert projected franc flows into dollar flows

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 16 million. The cash flows from the project would be SF 4.8 million per year for the next five years. What is the required..

  What is dollar amount of interest paid on commercial paper

Horizon Telecom sold $300,000 worth of 120-day commercial paper for $298,000. What is the dollar amount of interest paid on the commercial paper? What is the effective 120-day rate on the paper?

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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