Suppose that a convertible bond has a conversion ratio of 20 and a delta of 0.70 . For a price change of $0.125 for the stock price per share, what is the approximate change in the convertible bond's value?
What will be an ideal response?
The delta is used to estimate the impact of a change in the price per share of the underlying
stock on the convertible bond's value as follows:
approximate change in a convertible bond's value =
change in stock price per share * conversion ratio * delta
For our problem, we have a conversion ratio is 20, a delta of 0.70, and a price change of $0.125 for the stock price per share. Inserting in these values, the approximate change in the convertible bond's value is:
$0.125 * 20 * 0.70 = $1.75
You might also like to view...
The interpretation of results in correspondence analysis is similar to that in principal components analysis
Indicate whether the statement is true or false
Which of the following is correct?
a. The fair value of internally generated intangible assets should be estimated and recorded on the books of the entity that developed the assets even in the absence of a business acquisition. b. The fair value of internally generated intangible assets may be estimated but should not be recorded on the books or displayed on the financial statements of the entity. c. Managers may value their own companies and recognize goodwill in the company accounts even though an entity has not been acquired in a business acquisition. d. Goodwill should be recognized in the accounts whenever the value of the firm increases based on current market prices of the firm's common stock.
A process's capacity requirement states the future process capacity needed to meet projected customer demands, and includes an allowance for the desired capacity cushion
Indicate whether the statement is true or false
The rights of a holder of a warehouse receipt depend on whether the receipt is:? A) negotiable
B) rescissory. C) notarized as a document of title. D) notarized as a bill of lading.