Fifteen years ago, Roop Industries sold $400 million of convertible bonds. The bonds had a 40-year maturity, a 5.75% coupon rate, and paid interest annually. They were sold at their $1,000 par value. The conversion price was set at $62.75, and the Chapter 19: Hybrid Financing: Preferred Stock, Warrants, and Convertibles 781 common stock price was $55 per share. The bonds were subordinated debentures and were given an A rating; straight nonconvertible debentures of the same quality yielded about 8.75% at the time Roop’s bonds were issued.

a. Calculate the premium on the bonds—that is, the percentage excess of the conversion price over the stock price at the time of issue.