Question
A certain 6% annual coupon rate convertible bond (maturing in 20 years) is convertible at the holders option into 20 shares of common stock.The bond
A certain 6% annual coupon rate convertible bond (maturing in 20 years) is convertible at the holders option into 20 shares of common stock.The bond is currently trading at $800. The stock (which pays .71 a share in annual dividends) is currently proved in the market at $29.78 a share. A) what is the bonds conversion price B) what is the conversion ratio C) what is the conversion value and parity D) what is the conversion premium in dollars and percentage E) what is the bonds payback period F) if comparably rated, nonconvertible bonds sell to a yield of 8%, what is the investment value of the convertible?
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