If the common stock falls to 45 and the pure bond price is


The XLarge Corporation has a convertible bond outstanding with a conversion ratio of 20. The common stock is selling for $48.00. The convertible bond is selling for $1,160.00. SHOW ALL WORK FOR CREDIT

a) What is the conversion value? __________

b) What is the conversion premium? ________

c) What is the conversion price? ____________

d) If the common stock falls to $45, and the pure bond price is $890, will the bond sell for greater than its conversion value?

e) Why do firms offer convertible bonds? (discuss)

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Financial Management: If the common stock falls to 45 and the pure bond price is
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