An investor pays $30,000 for a convertible bond (one that can be converted into shares of corporate common stock). The bond conversion rate is 100 shares of stock anytime within the next five years. What will the stock price have to be in year 3 in order for the investor to make 10% per year on the investment? Assume the bond interest rate is 4% per year payable annually.

An investor pays $30,000 for a convertible bond (one that can be converted into shares of corporate common stock). The bond conversion rate is 100 shares of stock anytime within the next five years. What will the stock price have to be in year 3 in order for the investor to make 10% per year on the investment? Assume the bond interest rate is 4% per year payable annually.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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