Quaid Co.'s common stock sells for $34.00, pays a dividend of $2.30, and has an expected long-term growth rate of 5.8%. The firm's straight-debt bonds yield an 11.20% return. Quaid is planning a convertible bond issue. The bonds will have a 20-year maturity, pay a 10.20% annual coupon, have a par value of $1,000, and a conversion ratio of 25 shares per bond. The bonds will sell for $1,000 and will be callable after 10 years. Assuming that the bonds will be converted at Year 10, when they become callable, what will be the expected return on the convertible when it is issued? Do not round your intermediate calculations.
A. 12.25%
B. 15.47%
C. 12.89%
D. 14.18%
E. 13.53%
Answer: C
You might also like to view...
The costs associated with inventory in a production environment include all but which of the following?
a. Direct labor and overhead. b. Inspection of finished goods goods recieved for reslale. c. Set up costs for rescheduled production. d. Labor time and machine downtime.
The purchase of equipment is an example of:
a. An investing activity. b. A financing activity. c. An operating activity. d. None of these are correct.
Define what is meant by quality of work life, and list some aspects of successful quality of work life programs.
What will be an ideal response?
Define and explain the purpose of the business judgment rule. Under what circumstances would the rule apply? When would the protection not apply? Discuss fully