Bond conversion ratio


Problem:

The following data refers to the McDonald's issue of convertible bonds:

• Maturity: 10 years

• Stock price: $30.00

• Par value: $1,000.00

• Conversion price: $35.00

• Annual coupon: 5.00%

• Straight-debt yield: 8.00%

Required:

Question 1: What is the bond's conversion ratio?

Question 2: What is the bond's conversion value at t=0, assuming no growth?

Question 3: What is the bond's straight debt value?

Question 4: What is the minimum price (or "floor" price) at which the bonds should sell?

Note: Please show basic calculation

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Accounting Basics: Bond conversion ratio
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