What price will investors pay for the conversion privilege


X Company has issued convertible bonds with a coupon rate of 10% and a conversion ratio of 30 shares to one bond. They mature in 20 years and pay semiannual coupons. If similar straight debt has a nominal return of 14 percent, what price will investors pay for the conversion privilege if the bonds currently are selling in par?

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Financial Management: What price will investors pay for the conversion privilege
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