- 6 Marks
FM – NOV 2015 – L2 – Q4b – Foreign exchange risk and currency risk management
Determine the conversion rate, conversion premium, and evaluate the attractiveness of conversion for bondholders.
Question
b. On 1st January 2010, Exchequers Insurance issued a 15% convertible bond quoted at GH₵123. The nominal value for each bond is GH₵100 and the conversion date for the bond is 31st December 2015 after interest has been paid. The bond is convertible at 20 ordinary shares per GH₵100 bond. The current price per share is GH₵6.
Required:
i. Determine the conversion rate. (2 marks)
ii. Determine the conversion premium. (2 marks)
iii. Comment on the possibility of bondholders converting for shares. (2 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Conversion Premium, Conversion Rate, Convertible Bonds
- Level: Level 2
- Topic: Foreign exchange risk and currency risk management
- Series: NOV 2015
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