1. 21.

Pricing convertibles [LO 24.6] You have been hired to value a new 25-

year callable, convertible bond. The bond has a coupon rate of 2.3 per cent, payable annually. The conversion price is $68, and the share currently sells for $27.83. The share price is expected to grow at 11 per cent per year. The bond is callable at $1 200, but, based on prior experience, it will not be called unless the conversion value is $1 300. The required return on this bond is 8 per cent. What value would you assign?