Valuation of Convertible Instruments

Pregunta 1 de 10

1

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?

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100
95.24
75
15

Explicación

Pregunta 2 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

20
15
5
25

Explicación

Pregunta 3 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

20
15
100
10

Explicación

Pregunta 4 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

100
75
95.26
89.67

Explicación

Pregunta 5 de 10

1

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.)?

Selecciona una de las siguientes respuestas posibles:

0
10.33
4.76
25

Explicación

Pregunta 6 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

9.80
0.20
0.80
8

Explicación

Pregunta 7 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

No change required
Increase by 7%
Increase by 35%
Increase by 70%

Explicación

Pregunta 8 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

25 years
2.5 years
10 years
None of the above

Explicación

Pregunta 9 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

800
1,000
1,288.41
None of the above

Explicación

Pregunta 10 de 10

1

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?

Selecciona una de las siguientes respuestas posibles:

Yes
No
Investor would be indifferent on conversion

	Creado por Dinesh Jain hace casi 5 años

Chartered Accountancy Strategic Financial Management Test sobre Valuation of Convertible Instruments, creado por Dinesh Jain el 01/11/2019.

Valuation of Convertible Instruments

Pregunta 1 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 2 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 3 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 4 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 5 de 10

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.)?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 6 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 7 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 8 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 9 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación

Pregunta 10 de 10

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?

Selecciona una de las siguientes respuestas posibles:

Explicación