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A 9-year maturity convertible bond with a 7% annual coupon on a company with a bond rating of AAA is selling for $1,062. Each bond
| A 9-year maturity convertible bond with a 7% annual coupon on a company with a bond rating of AAA is selling for $1,062. Each bond can be exchanged for 80 shares, and the stock price currently is $13 per share. Other AAA-rated bonds with the same maturity would sell at a yield to maturity of 8%. What is the value of the implicit call option on the bond? (Round your answer to 2 decimal places.) 5 of 6 points | |
| Riskless profit | $ |
| Why is the bond selling for more than the value of the shares it can be converted into? 1 of 6 points | |
| The bond is worth more than the shares it can be converted into because the bond has (Click to select)a shorter life timean upper bounda "floor" value. | |
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