Questions from General Investment

Q: Red Eléctrica de España SA is refinancing its bank loans by issuing

Red Eléctrica de España SA is refinancing its bank loans by issuing 6.5% euro denominated bonds to investors. You are considering buying €15,000 of these bonds at par value. You could also invest $15,...

Q: Kim and Kanye have been dating for years and are now thinking

Kim and Kanye have been dating for years and are now thinking about getting married. As a financially sophisticated couple, they want to think through the tax implications of their potential union. a....

Q: An investor short sells 250 shares of a stock for $43

An investor short sells 250 shares of a stock for $43 per share. The initial margin is 60%. Ignoring transaction costs, how much will be in the investor’s account after this transaction if this is the...

Q: A certain convertible bond has a conversion ratio of 19 and a

A certain convertible bond has a conversion ratio of 19 and a conversion premium of 15%. The current market price of the underlying common stock is $30. What is the bond’s conversion equivalent?

Q: You are considering investing $800 in Higgs B. Technology Inc

You are considering investing $800 in Higgs B. Technology Inc. You can buy common stock at $25 per share; this stock pays no dividends. You can also buy a convertible bond ($1,000 par value) that is c...

Q: A certain 6% annual coupon rate convertible bond ($1,

A certain 6% annual coupon rate convertible bond ($1,000 par value, maturing in 20 years) is convertible at the holder’s option into 20 shares of common stock. The bond is currently trading at $800. T...

Q: An 8% convertible bond carries a par value of $1

An 8% convertible bond carries a par value of $1,000 and a conversion ratio of 20. Assume that an investor has $5,000 to invest and that the convertible sells at a price of $1,000 (which includes a 25...

Q: A certain bond has a current yield of 6.5%

A certain bond has a current yield of 6.5% and a market price of $846.15. What is the bond’s coupon rate?

Q: Assume you just paid $1,200 for a convertible bond

Assume you just paid $1,200 for a convertible bond that carries a 7% coupon and has 20 years to maturity. The bond can be converted into 24 shares of stock, which are now trading at $50 a share. Find...

Q: Find the conversion value of a convertible preferred stock that carries a

Find the conversion value of a convertible preferred stock that carries a conversion ratio of 1.6, given that the market price of the underlying common stock is $35 a share. Would there be any convers...