frcxc9355 frcxc9355

31-01-2020
Business

contestada

Suppose a firm just issued a $1,000 par value convertible bond. Its conversion ratio is 30 and the stock currently sells for $25 per share. Would it make better financial sense to hold onto the bond or convert it?

Respuesta :

tallinn tallinn

31-01-2020

Answer:

The bond should be held and conversion is not recommended

Explanation:

Conversion ratio specifies the no of shares which would be issued in exchange of one bond.

Market price of a share = $25 per share.

Hence convertible value of 1 bond = 30 shares/ stocks × $25 = $750

Face value of a bond = $1000

Thus, it is advisable to hold the bond and not convert it since the bond's conversion value is less than it's face value. So investor in such a scenario stands to lose if he opts for conversion.

Answer Link

Otras preguntas

On a coordinate plane, a line goes through (0, 3) and (3, negative 1). A point is at (negative 3, 2). What is the equation of the line that is parallel to the g

A university will add fruit juice vending machines to its classroom buildings if the student body president is convinced that more than 20 percent of the studen

Which characteristics show that large herbivores are adapted to the taiga?

1. Which of the following is a national resource?(a) gold and minerals(b) the money in the Bank(c) the people(d) all

write a compare-and-contrast anaylis to compare the way two different texts present similar ideas

When one element replaces another element the reaction is known as a _ replacement reaction

Work out m and c for the line: y = x + 6

the tennis team is having a bake sale. cookies sell for $1 each, and cupcakes are $3 each. If Connie spends $15 for 7 items, how many cupcakes did she buy?

How can we get bacteria off of us

what was one major challenge that African resistance movements and African resistance leaders faced during new imperialism?

ACCESS MORE EDU ACCESS Universidad de Mexico