Question

LLC Company has an outstanding issue of convertible bonds with a

$10,000 par value. These bonds are convertible into 20 shares of
common stock. They have a 10 per cent coupon and a 20- year
maturity.

Answer 1

A convertible bond is a type of bond that can be converted into a specified number of shares of common stock. The LLC Company has issued convertible bonds with a $10,000 par value, which are convertible into 20 shares of common stock. These bonds have a 10% coupon rate and a 20-year maturity.

Step-by-step explanation:

A convertible bond is a type of bond that can be converted into a specified number of shares of common stock in the issuing company. In this case, the LLC Company has issued convertible bonds with a $10,000 par value, which means that each bond can be converted into 20 shares of common stock.

Convertible bonds typically have a coupon rate, which is the annual interest rate paid to bondholders. These bonds have a 10% coupon rate and a 20-year maturity, which means that the bondholders will receive an annual interest payment of $1,000 (10% of $10,000) for 20 years.

At any point during the bond's life, the bondholder can choose to convert the bond into shares of common stock. In this case, each bond can be converted into 20 shares of common stock. Conversion may be advantageous if the price of the common stock exceeds the conversion price, which is the price at which the conversion occurs.