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A convertible bond has $1,000 par, pays 4.4% annual coupon, matures in 5 years, and is convertible from now through maturity. Conversion ratio is 41.
A convertible bond has $1,000 par, pays 4.4% annual coupon, matures in 5 years, and is convertible from now through maturity. Conversion ratio is 41. The convertible bond is trading at $1,089.37 today. What is the premium over straight value of this convertible bond? Assume the yield on a comparable non-convertible bond is 5%, and annual compounding.
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Public Finance
Authors: Richard W. Tresch
4th Edition
0128228644, 978-0128228647
