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A 12-year maturity convertible bond with a 5% annual coupon on a company with a bond rating of AAA is selling for $1,088. Each bond
A 12-year maturity convertible bond with a 5% annual coupon on a company with a bond rating of AAA is selling for $1,088. Each bond can be exchanged for 25 shares, and the stock price currently is $40 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 9%. What is the value of the implicit call option on the bond ?
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Finance And Financial Markets
Authors: Keith Pilbeam
4th Edition
1137515627, 978-1137515629
