What is the straight bond value of convertible

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Suppose James LLC issued a convertible (non-callable) bond with an annual coupon of 10% that matures in 5 years. The conversion ratio is 26.32 shares of stock per bond and James's LLC stock is currently trading at $30 per share. The convertible bond is priced at $900 in the market and the appropriate discount rate is 13%.

  • What is the Straight Bond Value of this convertible?
  • What is the Option Value of the Bond?
  • What is the Conversion Value of the Bond?
  • Based solely on today's values, should you convert?

Reference no: EM132373594

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