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A company has convertible bonds in issue.
The following debt is apply (31 December 20X0):
* Conversion ratio- 20 shares for each $130 bond.
* Current share price - $4 50
* Expected annual growth in share price - 5%
Advise the bond Holder at which date the convers on would be worthwhile?
Suggested Answer: C
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2 comments · newest first
MA
Maile
3 hours ago
This question is similar to one we practiced where we had to determine the breakeven point for converting bonds. I think we need to find when the share price exceeds the bond value.
MA
Margurite
5 days ago
I remember we discussed how to calculate the future share price based on the growth rate, but I'm not sure how to apply it to the conversion ratio.