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A convertible bond pays interest annually at a coupon rate of 5 percent on a par value of $1,000. The bond has 10 years maturity
A convertible bond pays interest annually at a coupon rate of 5 percent on a par value of $1,000. The bond has 10 years maturity remaining and the discount rate on other-wise identical non-convertible debt is 5 percent. The bond is convertible into shares of common stock at a conversion price of $25 per share (i.e., the bond is exchangeable for 40 shares). Today's closing stock price was $31.25. What is the floor value of this bond? A) $800.00 B) $1,000 C) $1,250
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