A Firm Has Outstanding Common Stock Valued at $67 a Share

question 30

Multiple Choice

A firm has outstanding common stock valued at $67 a share. The firm also has convertible bonds which have a $1,000 par value, a 7.5 percent, semi-annual coupon, and a time to maturity of 11 years. The bonds have a conversion ratio of 15. Comparable, non-convertible bonds have a yield to maturity of 8.2 percent. What is the intrinsic value of this bond?

• A) $949.90
• B) $957.37
• C) $975.83
• D) $1,005.00
• E) $1,360.76

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