Part(c)
Cash and bond offer: premium % to Strand Co shareholder
Each share has nominal value of $0.25 so $5 is 20 shares (i didn't understand this part)
Bond value $100/20 shares = $5 per share
Cash payment per Strand Co share = $1.25
Total return = 5 + 1.25 = $6.25
Premium = (6.25 – 4.77)/4.77 × 100 = 31.0%
And one more thing this convertible bond do we have in course , or can we get an exam question under convertible bond.
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Hav Co (june 13)
7y ago#1The question says that the nominal value of the shares is 0.25. Therefore $5 nominal value is the value of 5/0.25 = 20 shares.
Convertible bonds are revision from Paper FM (old Paper F9) and are explained in the Paper Pm lectures.
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