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Steel Dynamics (STLD) has a convertible bond issue that matures in four years. The bond has a face value of $1,000 and pays a coupon of 5.125%, with interest paid semiannually. The conversion ratio is 56.9801. If the stock of Steel Dynamics is currently priced at $15 a share, what is the conversion value of this bond, to the nearest cent?
Suggested Answer: A
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The conversion value of this bond $854.70. It is equal to its conversion ratio of 56.9801 times the current market price of its stock, $15. Thus, 56.9801 x $15 = $854.70.
4 comments · newest first
FL
Florinda
6 hours ago
I’m a bit confused about the conversion value versus the market value of the bond. Does it really equal the face value until maturity? That seems off.
SH
Shasta
5 days ago
I feel like the conversion value should be less than the face value since the stock price is pretty low compared to the bond's face value.
ST
Stephaine
11 days ago
I remember a similar question where we had to find the conversion value, and I think it was just the conversion ratio times the stock price. So, if I do that here, it should help.
EV
Evangelina
16 days ago
I think the conversion value is calculated by multiplying the conversion ratio by the current stock price, but I'm not entirely sure how to do that with the numbers given.