Valuation of Convertible Instruments

Descrição

Chartered Accountancy Strategic Financial Management Quiz sobre Valuation of Convertible Instruments, criado por Dinesh Jain em 01-11-2019.
Dinesh  Jain
Quiz por Dinesh Jain, atualizado more than 1 year ago
Dinesh  Jain
Criado por Dinesh Jain mais de 4 anos atrás
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Resumo de Recurso

Questão 1

Questão
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?
Responda
  • 100
  • 95.24
  • 75
  • 15

Questão 2

Questão
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?
Responda
  • 20
  • 15
  • 5
  • 25

Questão 3

Questão
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?
Responda
  • 20
  • 15
  • 100
  • 10

Questão 4

Questão
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?
Responda
  • 100
  • 75
  • 95.26
  • 89.67

Questão 5

Questão
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.)?
Responda
  • 0
  • 10.33
  • 4.76
  • 25

Questão 6

Questão
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?
Responda
  • 9.80
  • 0.20
  • 0.80
  • 8

Questão 7

Questão
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?
Responda
  • No change required
  • Increase by 7%
  • Increase by 35%
  • Increase by 70%

Questão 8

Questão
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?
Responda
  • 25 years
  • 2.5 years
  • 10 years
  • None of the above

Questão 9

Questão
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?
Responda
  • 800
  • 1,000
  • 1,288.41
  • None of the above

Questão 10

Questão
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?
Responda
  • Yes
  • No
  • Investor would be indifferent on conversion

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