Cheung Zap Inc. just issued 19-year convertible bonds at a par value of $1,000. At any time before maturity, investors have the option to exchange their bonds for shares of Cheungs common stock at a conversion price of $62.40.

Cheungs convertible bonds pay a 7.80% annual coupon, but if Cheung had issued straight-debt bonds (no conversion), it would have had to pay 13.00% annual interest.

1. Conversion ratio of Cheungs bond issue?

2. Straight-debt value of this convertible debt issue?

3. Value of the convertible option?

Cheungs common stock currently sells for $31 per share. Would an investor want to convert the bonds now?