2. 11.

Calculating values for convertibles [LO 24.6] You have been hired to value a new 30-year callable, convertible bond. The bond has a coupon rate of 2.7 per cent, payable semiannually, and its face value is $1 000. The conversion price is $54, and the shares currently sell for $38.

1. What is the minimum value of the bond? Comparable non-convertible bonds are priced to yield 4.9 per cent.

2. What is the conversion premium for this bond?