Find the conversion premium in dollars and in percent

Assignment Help Financial Management

Reference no: EM131084545

A company in the semiconductor industry has a $1,000 convertible bond with a conversion ratio of 32 and a coupon of 3.9%. The bond is currently priced at $740. The company’s stock trades at $19, and pays an annual dividend of $0.75.

a. Find the conversion value of this bond. Explain what this means.

b. Find the conversion premium in dollars and in percent.

c. Find the payback period. Explain what this means in your own words without quoting the definition of payback period. In addition, state whether or not this is considered to be an acceptable payback period.

Reference no: EM131084545

Questions Cloud

Hymn for a weekend : Please watch the Coldplay video for "Hymn for a Weekend" (on YouTube) and listen to the lyrics. Then answer the following questions

What will your interest payments be next year : You have just purchased a 10-year TIPS with face value $1,000 and a 4% coupon rate. Inflation for the year turns out to be 6%. What will your interest payments be next year? Show work or explain.

What would fully-taxable corporate bond : Emily is comparing two bonds that she is thinking about purchasing. One is a municipal bond issued by her home state with a 4% yield that would be free from both federal and state taxation. Emily is in the 25% federal tax bracket and the 5% state tax..

Analyze the benefits and drawbacks of fixed-price contracts : Analyze the benefits and drawbacks of fixed-price contracts from the perspective of a contractor. Analyze the benefits and drawbacks of cost-reimbursement contracts from the perspective of the federal government.

Find the conversion premium in dollars and in percent : A company in the semiconductor industry has a $1,000 convertible bond with a conversion ratio of 32 and a coupon of 3.9%. The bond is currently priced at $740. The company’s stock trades at $19, and pays an annual dividend of $0.75. Find the conversi..

Review psychodynamic humanistic and behavioral techniques : Imagine that you are suffering from test anxiety and that you are researching a different therapy approaches that might help you overcome your anxiety. Review psychodynamic, humanistic, behavioral, cognitive, and family and group therapy technique..

Course name-criminology : What if you were born in a poor neighborhood and your parents were working two jobs to survive. Your mom gets ill and cannot work anymore.

The market price of the bond and market interest rates : A bond will make its semi-annual interest payment of $80 exactly five days from today. You purchase this bond today, receive the interest payment five days from now, and sell the bond five days after that. Over then ten days you are holding the bond,..

How much citizen participation occurs in local government : How much citizen participation occurs in your local government, such as turnout in local elections and attendance at local government meetings?

User Account

All Pages