Question

Standard Olive Company of California has a $1,000 par value convertible bond outstanding with a coupon rate of 8 percent and a maturity date of 20 years. It is rated Aa, and competitive, nonconvertible bonds of the same risk class carry a 18 percent yield. The conversion ratio is 30. Currently the common stock is selling for $30 per share on the New York Stock Exchange.
a. What is the conversion price? (Round your answer to 2 decimal places.)
b. What is the conversion value? (Round your answer to 2 decimal places.)
c. Compute the pure bond value. (Use semiannual analysis.) Use Appendix B and Appendix D as an approximate answer, but calculate your final answer using the formula and financial calculator methods. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
d. Calculate the crossover point at which the pure bond value equals conversion value. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Answer

The answer and procedures of the exercise are attached in the following images.

Explanation  

Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in two sheets with the formulas indications.