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FIN2014 Corporate Finance Case Study
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- Course Code: FIN2014
- Course Title: Corporate Finance
- Referencing Styles: Not Selected
- Words: 1000
- University: Open University Malaysia
- Country: MY
Case Study Task:-
Tutorial Question 6 It is now 2020. Venom Inc. issued $10 million (face value) worth of convertible bonds in 2015. Each bond has the following features:
Face value $1,000 Coupon, annual $25 Conversion price $25 Current call price 105% of face value Current trading price 130% of face value Maturity 2021 Current stock price $30 per share Interest rate 10%.
- What is the straight bond value of each Venom bond? What does this value mean?
- What is the conversion value of each Venom bond? What does this value mean? What determines a bond’s conversion value?
- Is the Venom bond selling above or below its conversion value? Why is this happening?
- Should Venom call? Why or why not? What will happen if it does/does not?