Consider a $$1,000$ convertible bond with a $7$ percent annual coupon that is convertible into $50$ shares of common stock. The stock currently sells for $$16$ per share and

pays a dividend of $$0\mathrm{.}40$ per share. In terms of stock the bond is worth $$800.$

Note: Show your work to get credit.

a$.$ If the bond sells at par, what is the conversion premium $($i$.$e$.,$ premium over the conversion value$)?$

b$.$ What is the annual income from the bond?

c$.$ What is the annual income from the common stock shares?

d$.$ How many years is the payback period?