24 Convertible Bond Value Tvep plc issued convertible bonds with a conversion price of £20. The bonds are available for immediate conversion. The current price of the company’s equity is £18 per share.

The current market price of the convertible bonds is £990. The convertible bonds’ straight value is not known.

(a) What is the minimum price for the convertible bonds?

(b) Explain the difference between the current market price of each convertible bond and the value of the equity into which it can immediately be converted.