Exhibit 14-9
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
BioTech Industries has debentures outstanding (par value $1,000) convertible into the company's common stock at $30. The coupon rate is 11% payable semiannually and they mature in 10 years.
-Refer to Exhibit 14-9. At present, what would be the minimum value of the bond?
A) $600.00
B) $796.83
C) $889.82
D) $900.00
E) $1000.00

Question

Quizplus · Accepted Answer

The minimum value of the bond would be at least the greater of the two values, the straight-debt value or the conversion value. In this case, the minimum value is $900.00 (its conversion value).

Exhibit 14-9 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)