Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $890. The par...

Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $890. The par value is $1,000, the coupon rate is 9 percent, and the bond matures in 15 years. The conversion price is $40 and the company’s common stock is selling for $34 per share. Interest is paid semiannually.

If the interest rate on similar bonds that are not convertible are currently yielding 12 percent, what will be the pure bond value of the Pittsburgh Steel Company bonds? (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Pittsburgh Steel Company has a convertible bond outstanding, trading in the marketplace at $890. The par value is $1,000, the coupon rate is 9 percent, and the bond matures in 15 years. The conversion price is $40 and the company’s common stock is selling for $34 per share. Interest is paid semiannually.

If the interest rate on similar bonds that are not convertible are currently yielding 12 percent, what will be the pure bond value of the Pittsburgh Steel Company bonds? (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

SOLVED WITH BA II PLUS CALCULATOR

jeff jeffy answered 1 year ago

Determining values - convertible bond Craig's Cake Company has an outstanding issue of 20-year convertible bonds...

Determining values - convertible bond Craig's Cake Company has an outstanding issue of 20-year convertible bonds with a $1,000 par value. These bonds are convertible into 60 shares of common stock. They have a 13% annual coupon interest rate, whereas the interest rate on straight bonds of similar risk is 16%. a. Calculate the straight bond value of this bond. (ANSWER: $822.13) b. Calculate the conversion (or stock) value of the bond when the market price is $11 per share...

(a) Trump Limited has an outstanding issue of convertible bonds with $1,000 par value. These bonds...

(a) Trump Limited has an outstanding issue of convertible bonds with $1,000 par value. These bonds are convertible into 50 shares of Ali’s common stock. The convertible bonds have a 10% coupon with 10-year maturity. The yield-to-maturity for a straight bond of similar risk is 8%. i. Calculate the straight bond value of the convertible bond. ii. What is the conversion value of the convertible bond when the market price of Trump’s common stock is $30 per share? iii. If...

Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of...

Hilton Hotels Corp. has a convertible bond issue outstanding. Each bond, with a face value of $1,400, can be converted into common shares at a rate of 61.3002 shares of stock per $1,400 face value bond (the conversion rate), or $22.8384 per share. Hilton’s common stock is trading (on the NYSE) at $22.42 per share and the bonds are trading at $1,375. a. Calculate the conversion value of each bond. (Round your answer to 2 decimal places. (e.g., 32.16)) b....

a. Company x has 25,000 bonds outstanding that trade at par value (each bond has a...

a. Company x has 25,000 bonds outstanding that trade at par value (each bond has a par value of $1,000). Companies with similar characteristics have their bonds trading at a yield of 5.5%. The company also has 2 million shares of common stock outstanding. The stock has a beta of 1.2 and sells for $50 a share. The risk free rate is 2% and the market risk premium is 5%. The company’s tax rate is 30%. What is the company’s...

Eastern Digital Corp has a convertible bond outstanding with a coupon rate of 9% and a...

Eastern Digital Corp has a convertible bond outstanding with a coupon rate of 9% and a maturity date of 20 years. The market rate of interest on bonds of the same risk class carry a 10% return. The conversion ratio is 40. The company’s common stock is selling for $18.25 per share. The bond is selling for $970. What is the conversion value? What is the conversion premium?

a). Find details of a convertible bond that is currently available for trading anywhere in the...

a). Find details of a convertible bond that is currently available for trading anywhere in the world. List the characteristics and conversion details of the bond. b). Provide a current investment recommendation for the convertible bond –that is, would you currently recommend it for investment –why or why not? (there is no details for bond, please provide your own example)

A Japanese company has a bond outstanding that sells for 106 percent of its ¥100,000 par...

A Japanese company has a bond outstanding that sells for 106 percent of its ¥100,000 par value. The bond has a coupon rate of 5.4 percent paid annually and matures in 11 years. What is the yield to maturity of this bond?

A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par...

A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par value. The bond has a coupon rate of 6 percent paid annually and matures in 16 years. What is the yield to maturity of this bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) FINANCIAL CALCULATOR CALCULATIONS ONLY

On January 1, 2011, Lin Company issued a convertible bond with a par value of $100,000...

On January 1, 2011, Lin Company issued a convertible bond with a par value of $100,000 in the market for $120,000. The bonds are convertible into 12,000 ordinary shares of $1 per share par value. The bond has a 5-year life and has a stated interest rate of 10% payable annually. The market interest rate for a similar non-convertible bond at January 1, 2011, is 8%. Required: a. Compute the liability component of the convertible bond on January 1, 2011...

Suppose you work for the Pittsburgh Steel Company. Your company specializes in rolling specialty steel alloys and titanium.

Suppose you work for the Pittsburgh Steel Company. Your company specializes in rolling specialty steel alloys and titanium. Material is purchased in slabs that may be up to 6 inches thick and is rolled into plates (about 0.5 inches thick) and sheets (.060 to 0.25 inches thick). Pittsburgh Steel Company's marketing strategy is to fill smaller orders that their competitors cannot produce profitably and to specialize in orders for materials that are difficult to process (like certain steel alloys, etc.)...

Question