A 

​$1 comma 000.001,000.00 

face value bond has a conversion ratio of 

3737. 

You estimate the transaction costs of conversion to be 

2.6 %2.6% 

of the face value of the bond. What price must the stock reach in order for you to​ convert?

Question content area bottom

Part 1

The required price per share will be 

​$enter your response here. 

 ​(Round to the nearest​ cent.)

To calculate the stock price at which you would want to convert the bond into shares, we need to follow these steps:

### Given:
- Face value of the bond: \$1,000.00
- Conversion ratio: 3737 shares
- Transaction cost: 2.6% of the face value

### Step-by-Step Calculation:

1. **Transaction Cost Calculation**:
   Transaction cost = 2.6% of \$1,000.00
   \[
   \text{Transaction cost} = 0.026 \times 1000 = 26
   \]
   
2. **Net Value of the Bond** (after deducting transaction cost):
   \[
   \text{Net value of bond} = 1000 - 26 = 974
   \]

3. **Price per Share**:
   The stock price per share is the value of the bond after transaction costs divided by the conversion ratio:
   \[
   \text{Price per share} = \frac{\text{Net value of bond}}{\text{Conversion ratio}} = \frac{974}{3737}
   \]
   
   Now, let's calculate the price per share.

\[
\frac{974}{3737} = 0.2606
\]

The required price per share is **\$0.26** (rounded to the nearest cent).

### Final Answer:
\[
\boxed{\$0.26}
\]

Would you like a more detailed explanation, or have any questions on this?

---

Here are 5 related questions:
1. How does a conversion ratio impact the conversion decision?
2. How does the transaction cost percentage affect the break-even point for conversion?
3. What factors could influence whether it's favorable to convert a bond into stock?
4. How is the face value of a bond different from its market value?
5. How do you calculate the breakeven stock price for a convertible bond?

**Tip:** Always consider transaction costs and any tax implications when calculating conversion or breakeven points.

$1,000.00 face value bond has a conversion ratio of 3737. You estimate the transaction costs of conversion to be 2.6% of the face value of the bond. What price must the stock reach in order for you to convert?

Learn how to calculate the stock price required for converting a $1,000 bond with a 3737 conversion ratio, considering a 2.6% transaction cost. This detailed guide includes step-by-step instructions, using percentage and division calculations. Ideal for high school students in Grades 9-12.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation