Mathematics · Financial Mathematics
Bubblegum Co has 12% convertible loan notes outstanding, maturing in 5 years and to be redeemed at a face value of $100 per note. Alternatively, each note can be converted into 40 ordinary shares (nominal value $1 each) after 5 years. The company's ordinary shares are trading at $2 each, projected to grow at 5% annually. If the pre-tax cost of debt is 10%, what is the current market value of each loan note rounded to the nearest dollar?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1$95
- 2$109✓
- 3$100
- 4$122
Correct answer
$109
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