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Hi sir
When calculating the market value of the convertible debt in two months time, with no conversion, can we not assume that the market value is still $110, as the period to maturity (4 years) and the GYTM is still 9%?
And if this assumption does not hold true, then surely when calculating the market value in two months time we need to reduce the period to maturity to 3 years and 10 months as we are told in the question that the loan stock has ‘four years to maturity’ currently
Thanks
I am sorry, but I only have the original examiners question Seal Island (June 2010) and there is no part (c) and no mention of anything to do with convertible debt.
Whichever book you are using must have amended it for some reason and added more parts, and so I am not able to help you.
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