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A 9-year maturity convertible bond with a 6% annual coupon on a company with a bond rating of AAA is selling for $1,032. Each
A 9-year maturity convertible bond with a 6% annual coupon on a company with a bond rating of AAA is selling for $1,032. Each bond can be exchanged for 50 shares, and the stock price currently is $20 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 7%. What is the value of the implicit call option on the bond? (Round your answer to 2 decimal places.) Riskless profit $ Why is the bond selling for more than the value of the shares it can be converted into? The bond is worth more than the shares it can be converted into because the bond has (Click to select)
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