We buy a convertible bond for $700 when the underlying stock price is $30 and the straight value of the bond is $650. If the stock price drops to $1, what the maximum loss that the buyer of the convertible bond may incur?
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We buy a convertible bond for $700 when the underlying stock price is $30 and the straight
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- You just purchased a convertible bond. Today, the strictly debt value is inferior relative to the conversion value. If the required return on the bond increases: a) The minimum price of the bond will decrease. b) The minimum price of the bond will increase. c) The minimum price of the bond remains the same. d) The strictly debt value of the bond will be superior to the conversion value. e) It is impossible to make that determination with this information.Finance You own a convertible bond issued by a company and this gives you the option to switch the bond into a number of shares of that company at a date in the future. An event occurs which causes the value of the shares of the company to fall and the future volatility of the price of its shares to rise. The value of your convertible bond should: A Fall because the share price is lower. B Rise because there is more chance the option will be in the money. C Fall because default risk has risen.Fall because default risk has risen. D I do not wish to answer this question. E Could either rise or fall because two offsetting factors have occurred F Be unchanged because there is no reason to think default risk has changed.I got this example to calculate the value of a zero-coupon bond. It is solved. However, my question is about The difference between the purchase price, and par value is the investor’s interest earned on the bond. Is it a gain or loss of $57.5? And should I consider purchasing the bond? The value of a zero-coupon bond with a face value of $1,000, YTM of 3%, and 2 years to maturity would be $1,000 / (1.03)2, or $942.59 Since it's below the par value, it's considered a "discount bond," but my confusion is whether to buy the bond or not. Therefore, any help to master this topic will be much appreciated.
- Consider a coupon bond, period t = 0 price $900, with payments: t=0 1 2 3 50 50 1050 Discount (zero coupon) bonds of 1, 2 and 3 years maturity (all with maturity value of $1000) sell for respectively, 960, 900, 820 dollars. Is this coupon bond properly priced? If not, design an arbitrage argument to profit by the mispricing.Susan is looking into a convertible bond but does not know how to value this bond. The bond has a $1,000 face value and a conversion ratio of 36. What is the conversion price? If the stock price is $42, what is the conversion value? What is the downside risk percentage of the bond if the current price is $1,250 and the investment premium is $861.53? Is this risk concerning? The stock is currently selling for $42 per share. The issuer of the bond has announced a call; the call price is 108. What are your options here? What should you do?A zero-coupon bond can never sell for more than $1000. Show your work Select one: True False
- As an investor would you pay more than $10,000 to buy a $10,000 non-convertible zero coupon bond? Explain.Assume you have treasury note .The contract price is 124 and you can deliver either bond A with conversion of 0.9 and price of 110 or a bond with conversion of 0.7 and price is 100. What will be the loss gain of the buyer? ( 1.77 -1.77 9.3 -9.3You own a convertible corporate bond that has a par value of R1000. You are considering exercising the embedded option, which has a conversion price of 106. If the firm's share price is currently 180.23, what is the conversion value of your bond?Provide your answer in Rands (R), correct to TWO decimal places. However, do not write the sign (R) only write down the value and do not leave any spaces between numbers.
- 1. When the market interest rate rises, what happens to bond prices? Group of answer choices They rise They stay the same Cannot be determined They fall 2. A bond discount occurs when: Group of answer choices The price of a bond is above its face value. The price of a bond is above its maturity value. The price of a bond is below its face value. The price of the bond is equal to a bond's face value. 3. When a bond sells for a premium, Group of answer choices The price is above the face value The price is equal to the face value. The price is below the face value The price is below the maturity value. 4. A bond has a face value of $100,000 and a price of $97,000. The journal entry at the date of issuance would include: Group of answer choices A credit to Bond Discount of 3,000 A debit to Bond Discount of 97,000 A debit to Bond Discount of 3,000 A credit to Bond Premium of 3,000 5. A bond has a face…True or False An asset or stock with a beta less than 1.0 means the stock is more risky than the market in general. Bonds that have a callable feature allow the bond holder to convert their debt to common shares of stock. Bond holders have voting rights and common shareholders do not. Bond holders have first claim on assets in the event of a bankruptcy, so they are less risky than common stock. An ordinary annuity is preferred by investors because they receive their payment at the beginning of each period.please dont answer in excel i dont understand that only equations and worded answers please. Given the following information concerning a convertible bond: Coupon: 6 percent ($60 per $1,000 bond) Exercise Price: $25 Maturity date: 20 years Call Price: $1040 Price of the common stock: $30 F. What do investors receive if they do not convert the bond when it is called? G. If the bond were called, would it be advantageous to convert?