7. A convertible bond has the following features:

Face Value: $1,000 Maturity: 20 years Annual coupon: $80 Conversion Price: $100 Market Price of the Convertible Bond: $800

a. The bond may be converted into how many shares?

b. What is the current value of the convertible as a bond if prevailing interest rates are 11%?

c. What is the current value of the convertible as a stock if the current stock price is $75 per share?

d. Based on (b) and (c), what is the premium reflected in the Market Price?

e. If the stock price increases to $93 per share and the premium stays the same, what is the expected Market Price of the convertible?