A convertible preferred shares is priced at R100, with a conversion ratio of five. If the...
A convertible preferred shares is priced at R100, with a conversion ratio of five. If the common shares move to R25 per share, what would the preferred shareholder’s return be if they converted now?
Homework Answers
Answer:
Convertible Preferred Share : R 100
Common Share : R 25
Conversion Ratio is 5, that means 5 Common Shares for 1 Preferred Share
Value of Common Shares after Conversion : R25*5= R125
Return of Preferred Shareholder if converted : R125-R100= R 25
% Return : 25*100/100= 25%
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