Valuation of Convertible Instruments

Descripción

Chartered Accountancy Strategic Financial Management Test sobre Valuation of Convertible Instruments, creado por Dinesh Jain el 01/11/2019.
Dinesh  Jain
Test por Dinesh Jain, actualizado hace más de 1 año
Dinesh  Jain
Creado por Dinesh Jain hace casi 5 años
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Resumen del Recurso

Pregunta 1

Pregunta
Face value of bond = Rs.100; Rate of interest on bond = 8%; Return on similar bonds = 9.5%. Term = 4 years. Bond is convertible into 5 shares. CMP of equity share = 15. What is bond's conversion value?
Respuesta
  • 100
  • 95.24
  • 75
  • 15

Pregunta 2

Pregunta
Face value of bond = Rs.100; CMP of bond = Rs.100 Rate of interest on bond = 8%; Return on similar bonds = 9.5%. Term = 4 years. Bond is convertible into 5 shares. CMP of equity share = 15. What is bond's conversion premium per share?
Respuesta
  • 20
  • 15
  • 5
  • 25

Pregunta 3

Pregunta
Face value of bond = Rs.100; CMP of bond = Rs.100; Rate of interest on bond = 8%; Return on similar bonds = 9.5%. Term = 4 years. Bond is convertible into 5 shares. CMP of equity share = 15. What is conversion parity price?
Respuesta
  • 20
  • 15
  • 100
  • 10

Pregunta 4

Pregunta
Face value of bond = Rs.100; Rate of interest on bond = 8%; Return on similar bonds = 9.5%. Term = 4 years. Bond is convertible into 5 shares. CMP of equity share = 15. What is bond's straight value?
Respuesta
  • 100
  • 75
  • 95.26
  • 89.67

Pregunta 5

Pregunta
Face value of bond = Rs.100; CMP of bond = Rs.100; Rate of interest on bond = 8%; Return on similar bonds = 9.5%. Term = 4 years. Bond is convertible into 5 shares. CMP of equity share = 15. What is downside risk (in Rs.)?
Respuesta
  • 0
  • 10.33
  • 4.76
  • 25

Pregunta 6

Pregunta
Face value of bond = Rs.100; Interest rate on bond = 10%. Bond is convertible into 10 shares. Likely dividend per share is Rs.0.2. What is favorable income differential per share?
Respuesta
  • 9.80
  • 0.20
  • 0.80
  • 8

Pregunta 7

Pregunta
Existing EPS = Rs.2; Existing no of shares = 1,00,000. Company plans to issue 7% preference capital of Rs.10,00,000. What should be the increase in earnings post preference issue to maintain EPS?
Respuesta
  • No change required
  • Increase by 7%
  • Increase by 35%
  • Increase by 70%

Pregunta 8

Pregunta
Conversion premium per bond = Rs.100. One bond is convertible into 10 shares. Favorable income differential per share = Rs.4. How much is the premium payback period?
Respuesta
  • 25 years
  • 2.5 years
  • 10 years
  • None of the above

Pregunta 9

Pregunta
Face value = Rs.1,000; Rate of interest = 10%. The bond is convertible into 10 equity shares whose current market price is Rs.80. Growth rate in equity share is 10%. What will be the terminal cash flow at end of year 5?
Respuesta
  • 800
  • 1,000
  • 1,288.41
  • None of the above

Pregunta 10

Pregunta
CMP of bond = Rs.1,200. One bond is convertible into 10 shares. CMP of share is Rs.125. Should the investor opt for conversion?
Respuesta
  • Yes
  • No
  • Investor would be indifferent on conversion
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