1
answer
0
watching
158
views
28 Sep 2019
Newlink Genetics (NLNK) has just issued 25-year callable convertible bonds with a coupon rate of 6% annually and a par value of $1,000. Coupon payments are made on a semi-annual basis and the bond has a conversion price of $95. The companies stock is selling for $31 per share. The owner of the bond will be forced to convert if the bonds conversion value is ever greater than or equal to $1,250. The required rate of return on an otherwise identical nonconvertible bond is 8%. a. What is the minimum value of the bond? b. if the stock were to grow by 15% forever, how long would it take the bonds conversion value to exceed $1,250?
Newlink Genetics (NLNK) has just issued 25-year callable convertible bonds with a coupon rate of 6% annually and a par value of $1,000. Coupon payments are made on a semi-annual basis and the bond has a conversion price of $95. The companies stock is selling for $31 per share. The owner of the bond will be forced to convert if the bonds conversion value is ever greater than or equal to $1,250. The required rate of return on an otherwise identical nonconvertible bond is 8%. a. What is the minimum value of the bond? b. if the stock were to grow by 15% forever, how long would it take the bonds conversion value to exceed $1,250?
Beverley SmithLv2
28 Sep 2019
Related questions
| You have been hired to value a new 10-year callable, convertible bond. The bond has a coupon rate of 3.6 percent, payable semiannually, and its face value is $1,000. The conversion price is $57, and the stock currently sells for $44. |
| a. | What is the minimum value of the bond? Comparable nonconvertible bonds are priced to yield 4 percent. (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) |
| Minimum value of the bond | $ |
| b. | What is the conversion premium for this bond? (Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) |
| Conversion premium | % |
