A convertible bond with a face value of 5,000 is issued at 6,750 with a coupon rate of 10.5%. The conversion rate is 14 shares per bond. The current…
CA Final · Advanced Financial Management · MTP · November 2024
A convertible bond with a face value of 5,000 is issued at 6,750 with a coupon rate of 10.5%. The conversion rate is 14 shares per bond. The current market price of the bond and share is 7,375 and 400respectively. Determine: (i) Stock Value of Bond. (ii) The premium over conversion value.
Suggested Answer and Working Notes:
(i) Conversion rate is 14 shares per bond and Market price of share is 400then Stock Value of Bond shall be: 14 × ₹ 400 = 5,600 (ii) Premium over Conversion Value (₹ 7375 -5600) = (1775/5600) x 100 = 31.70%
Topics: Security Valuation
Related Questions in this Topic
- Rahul Ltd. has surplus cash of ₹ 100 lakhs and wants to distribute 27% of it to the shareholders. The company decides to...
- Shares of V Ltd. are currently quoted at a trailing Price-to-Earnings (P/E) ratio of 8 times. As per the existing policy...
- Mr. A is thinking of buying shares at 500 each having face value of 100. He is expecting a bonus at the ratio of 1: 5 du...
- The data given below relates to a convertible bond: Face value 1,000 Coupon rate 12% No. of shares per bond...
- XYZ Ltd. recently paid a dividend of 40. The company is entering a 5-year transition phase where its current 15% growth ...