Maurice Tutor

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Teaching Since: May 2017
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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 01 Jun 2017 My Price 10.00

bond is convertible

Valuation – convertible bond.

 

You purchased one of Big Corp.’s 8%, 10-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $20. Similar bonds without a conversion feature returned 12% at the time. The bond is convertible into stock at a price of $30. The stock is now selling for $35.

 

Assume no dividends.

a) You exercise the conversion feature today and immediately sold the stock you received. Calculate the total return on your investment.

b) What would your return have been if you had invested $1,000 in Big’s stock instead of the bond?

Answers

Maurice Tutor
(5)
Status NEW Posted 01 Jun 2017 08:06 PM My Price 10.00

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